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(3)
| According to the Schedule 13G filed by on January 10, 2019, BlackRockAmbac Financial Group, Inc. beneficially owned 6,190,576 shares of our Common Stock. BlackRock Inc. reported sole voting power with respect to 6,106,878 shares and sole dispositive power with respect to 6,190,576 shares. The address of BlackRock Inc. is 55 East 52nd Street, New York, New York 10055.| 35 | 2022 Proxy Statement |
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(4)
| According to the Schedule 13G/A filed on February 13, 2019, The Vanguard Group beneficially owned 4,654,819 shares of our Common Stock. The Vanguard Group reported sole voting power with respect to 48,292 shares, shared voting power with respect to 9,200 shares, sole dispositive power with respect to 4,602,761 shares, and shared dispositive power with respect to 52,058 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
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(5)
| See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for description of the limitations on voting and transfer of Ambac’s common stock pursuant to Ambac’s Amended and Restated Certificate of Incorporation. Ambac has determined that the holdings described above do not violate the restrictions set forth in its Amended and Restated Certificate of Incorporation. |
EXECUTIVE COMPENSATION
Executive Officers
The names of our executive officers and their ages, positions, and biographies as of April 10, 2019March 30, 2022 are set forth below. Our executive officers are appointed by, and serve at the discretion of, our Board.
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Name | Age | Position with Ambac |
Claude LeBlanc | 5356 | President and Chief Executive Officer and Director |
David Barranco | 4851 | Senior Managing Director |
Robert B. Eisman | 5154 | Senior Managing Director, Chief Accounting Officer and Controller |
Stephen M. Ksenak | 5356 | Senior Managing Director and General Counsel |
Michael ReillyDaniel McGinnis | 6250 | Senior Managing Director, Chief Administrative Officer and Chief InformationOperating Officer |
R. Sharon Smith | 4851 | Senior Managing Director, Chief of Staff |
David Trick | 4750 | Executive Vice President, Chief Financial Officer and Treasurer |
Claude LeBlanc was appointed President and Chief Executive Officer of Ambac effective January 1, 2017. Mr. LeBlanc provides strategic leadership to Ambac by working with the Board and other members of senior management in developing and implementing the Company’s corporate strategies to maximize long-term stockholder value. Mr. LeBlanc actively oversees the Company's overall day to day operations and strategic advancement, including the pursuit of potential new business opportunities that meet acceptable criteria that the Company believes will generate long-term stockholder value with attractive risk-adjusted returns. See full biography under “Board of Directors - Directors” above.
David Barranco has served as Senior Managing Director of Ambac since February 2012. Mr. Barranco is the head of Risk Management, a position he has held since October 2016. Mr. Barranco has executive responsibility for risk remediation, credit risk management, surveillance and other related risk management responsibilities across the insured portfolio. Previously, he was head of the Restructuring Group and had responsibility for corporate development and strategy. Since September 2011, Mr. Barranco has served as Executive Director of Ambac Assurance UK Limited, Ambac’s London-based financial guarantee subsidiary. Mr. Barranco joined Ambac in 1999.
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Robert B. Eismanhas served as the Chief Accounting Officer, Controller, and a Senior Managing Director of Ambac since January 2010. Mr. Eisman has responsibilityis responsible for establishing Ambac’s U.S. GAAP and Ambac Assurance Corporation's U.S. statutory accounting policies and managing Ambac’stheir respective financial reporting in compliance with SEC and U.S. insurance company regulatory requirements. Mr. EismanHe is also responsible for establishing Ambac’s U.S. GAAP and statutory accounting policies,enterprise-wide budgeting and forecasting and providing accounting services to Ambac Assurance UK Limited. From August 2010 through September 2015, Mr. Eisman served as an Executive Director ofAmbac’s subsidiaries, including Ambac Assurance UK Limited. Mr. Eisman joined Ambac in 1995 from KPMG LLP where he was an Audit Manager in the Financial Services group with a specialization in insurance companies.
Stephen M. Ksenak has served as Senior Managing Director and General Counsel of Ambac since July 2011. Mr. Ksenak has executive responsibility for managing Ambac’s legal affairs. Prior to joining Ambac as Vice President and Assistant General Counsel in 2002, Mr. Ksenak practiced at the law firm of King & Spalding LLP.
Michael ReillyDaniel McGinnis has served as Chief Administrative Officer, Chief InformationOperating Officer and Senior Managing Director of Ambac since February 2012. December 2021. He oversees key business areas for both Ambac’s legacy Financial Guarantee and new specialty Property and Casualty insurance businesses, including Operations, Technology and Human Resources. Mr. Reilly has executive responsibility for managing Ambac’s Human Resources, Administration,McGinnis brings over 25 years of experience as a senior insurance industry professional, having previously worked as Chief Underwriting Officer and Chief Operating Officer of CapSpecialty, Inc. Previous to CapSpecialty, Mr. McGinnis was Division Executive of the Small Business Solutions and Information Technology. From October 2009Division at American International Group (AIG). Previous to January 2012,AIG, he was Managing Director with the responsibility for managing Information Technology. Mr. Reilly joined Ambac in 2009.American Reinsurance Company and Marsh USA, where he was Vice President of Finite Risk Underwriting and Vice President of Marsh Risk Finance, respectively.
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Ambac Financial Group, Inc. | 36 | 2022 Proxy Statement |
R. Sharon Smith has served as Chief of Staff and Senior Managing Director of Ambac since May 2017. Ms. Smith has executive responsibility for Ambac's Corporate Services Group which encompasses certain key functions within the Company including, Strategy, Investor Relations,Corporate Communications and Model Governance and Analytics, as well as oversight of Internal Audit. Ms. Smith joined Ambac from Syncora Guarantee Inc., ("Syncora"), where she served in numerous capacities during her tenure, including as Associate General Counsel and Head of Investor Relations. Ms. Smith was also General Counsel and Chief Compliance Officer for Camberlink LLC (a wholly owned subsidiary of Syncora). Earlier in her career, Ms. Smith was Vice President and Assistant General Counsel of the Corporate Securities Department of New York Life Investment Management LLC, and an attorney for Clifford Chance; Skadden, Arps, Slate, Meagher & Flom LLP and Weil, Gotshal & Manges LLP.
David Trick was named Executive Vice President of Ambac in November 2016. He has served as Chief Financial Officer of Ambac since January 2010 and as a Senior Managing Director from January 2010 until his appointment as Executive Vice President. Mr. Trick was interim President and Chief Executive Officer of AAC from January 2015 until March 2016. As Chief Financial Officer, Mr. Trick has executive responsibility for managing Ambac’s financial affairs, including financial reporting, asset and liability management, investment management, financial planning, tax strategy, capital resources, operations, capital markets and liquidity.liquidity and Investor Relations function. In addition, since May 2006, he has served as Treasurer of Ambac and AAC.Ambac. Since September 2015, Mr. Trick has served as an Executive Director of Ambac Assurance UK Limited. Mr. Trick joined Ambac in 2005 from The Bank of New York Mellon, where he was a senior banker responsible for delivering strategic solutions to insurance industry clients including those in the financial guaranty industry, with regard to a broad range of treasury, credit, and capital markets products.
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Ambac Financial Group, Inc. |29 37 | 20192022 Proxy Statement |
Compensation Discussion and Analysis
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WE ASK THAT YOU VOTE TO APPROVE OUR 20192022 SAY ON PAY PROPOSAL |
At our 20192021 Annual Meeting, our stockholders will again have an opportunity to cast an advisory say on pay vote on the compensation paid to our named executive officers. We ask that our stockholders vote to approve executive officer compensation. Please see “Proposal No. 2-Advisory2—Advisory Vote to Approve Named Executive Officer Compensation.” |
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program, including important changes the Committee has made since our 20182021 annual meeting of stockholders, and decisions relating to the fiscal year 20182021 compensation of our named executive officers (“NEOs”), identified in the table below.
Our Named Executive Officers
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Claude LeBlanc | | Stephen M. Ksenak |
President and Chief Executive Officer and Director | | Senior Managing Director and General Counsel |
David Trick | | R. Sharon Smith |
Executive Vice President, Chief Financial Officer and Treasurer | | Senior Managing Director and Chief of Staff |
David Barranco | | |
Senior Managing Director | | |
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Ambac Financial Group, Inc. |30 38 | 20192022 Proxy Statement |
Executive Summary
Our compensation programs are designed to reward execution and value creation relating to the implementation of our strategies. In 2018, following an engagement campaign in which we solicited feedback from stockholders representing approximately 55%To ensure that our compensation programs align with the expectations of our outstanding common stock, westockholders, in the Fall of each year, Ambac proactively seeks out opportunities to engage in a dialogue with our stockholders. As a result of these stockholder engagements, over the years our Compensation Committee has made important enhancements to our compensation programs and processes. These enhancements include changes to the design of our Long Term Incentive Program. We addedannual and long-term incentive plans, and the implementation of important compensation-related policies, e.g., a Stock Ownership Policy and a Recoupment Policy, and the addition of a relative Total Shareholder Return ("rTSR") modifier as an additional metric with respect to our LTIP award payouts. The rTSR modifier will cause any final PSU award payout at the endwas added to further align compensation to Ambac's stock performance. In 2021, we solicited feedback from stockholders representing approximately 63% of a three year performance periodour outstanding common stock, which informed certain changes to be increased or decreased by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. In addition, we eliminated the "retesting" featureour executive compensation program in the Long-Term Incentive Compensation Program that allowed performance at AAC to be measured by the greater of two metrics: an improved asset liability ratio ("ALR") or improved net asset value ("NAV") over a three year performance period. In 2018, metrics for LTIP awards related to AAC performance will be measured based2022. See "2021 Say on (i) reductions in Watch ListPay Vote and Adversely Classified Credits weighted at 42.5%, and (ii) improvements in NAV weighted at 42.5%. With the implementation of these changes, keyStockholder Outreach."
Key features of our compensation program include:
•Competitive compensation levels and practices;
•Performance-based incentive plans (annual STIP awards and three year LTIP PSU awards) that are based on quantitative goals and objectives, and aligned with our key business strategies;
Greater•Significant weighting on equity-based compensation as a component of total compensation, andincluding the existence of an Executivea Stock Ownership Policy;Policy applicable to our executives;
•rTSR modifier aligns compensation results with actual stock performance compared to peers; and
•Policies to manage compensationcompensation-related risk and support good governance, including a Recoupment Policy.
2018Key Strategic Priorities and 2021 Company Performance
Our primary business objective is to maximize stockholder value through the execution of our key business strategies. strategic priorities, which were outlined in 2021 as follows:
•Active runoff of AAC and its subsidiaries through transaction terminations, commutations, restructurings, and reinsurance with a focus on our watch list credits and known and potential future adversely classified credits, that we believe will improve our risk profile, and maximizing the risk-adjusted return on invested assets;
•Ongoing rationalization of Ambac's capital and liability structures;
•Loss recovery through active litigation management and exercise of contractual and legal rights;
•Ongoing review of the effectiveness and efficiency of Ambac's operating platform; and
•Further expanding into specialty property and casualty program insurance, managing general agency/underwriting and potentially other insurance and insurance related businesses that will generate long-term shareholder value with attractive risk-adjusted returns and meet other preestablished criteria.
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Ambac Financial Group, Inc. | 39 | 2022 Proxy Statement |
In 2018,2021, we took important steps to enhance the Company’s ability to achieve this objective.advance these strategic objectives. Key highlights and results include the following:
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lSuccessfully executed a transformational holistic restructuring transaction resulting in the exit of Ambac Assurance Corporation’s (“AAC”) Segregated Account from rehabilitation, increasing book value per share by approximately $7.00. |
lNegotiated and executed the Puerto Rico COFINA Plan Support Agreement in 2018 which led to a court-approved Plan of Adjustment, resolving 78% of Ambac's total Puerto Rico exposure and reducing COFINA net par exposure by 75% in the first quarter of 2019.
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lExecuted commutations and terminations in the municipal, structured and international sectors
○ReducedDecreased our insured portfolio net par exposureoutstanding at AAC by 25%17% to $28.0 billion from $62.7 billion to 46.9 billion at December 31, 2018
○year-end 2020.
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l | Decreased Adversely Classified Credits and Watch List Credits at AAC by 23% from $14.1, to $10 billion. |
l | Active de-risking transactions accounted for $3 billion downof the $6 billion reduction in net par in 2021 and $2 billion of the $3 billion reduction in adversely classified and watch list net par exposure |
l | Executed a plan support agreement with the Oversight Board for the Commonwealth of Puerto Rico to $10.9 billion:restructure AAC’s insured PRIFA Rum Tax exposure; Joined plan support agreements that the Oversight Board had previously entered into with other major creditors that addressed the restructuring of AAC’s GO, PBA, HTA and CCDA exposures |
l | Trial date for the Bank of America/Countrywide case is scheduled for September 7, 2022 |
l | Executed an exchange transaction for junior surplus notes resulting in extinguishment of $76 million in debt and accrued interest. |
l | Material advancement and growth of the Company' specialty P&C insurance platform, including: ◦The establishment of the Everspan Group of companies with an A.M. Best financial strength rating of 'A-' (Excellent), Class VIII designation; ◦Ten program partners signed to date; ◦Platform expansion with the acquisition of four additional admitted carriers; and ○◦Decreased Watch List Credits by 19% from $11.1 billion down to $9.0 billion.Admitted capabilities in all 50 states.
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lExecuted additional headcount and other cost reductions which, together with measures implemented | Xchange Benefits, LLC ("Xchange") was onboarded in early 2021 following its acquisition by Ambac in late 2017, resulted in a 27% reduction in headcount and a lower run-rate for operating expenses.December of 2020. |
lExecuted an Auction Market Preferred Shares ("AMPS") exchange transaction, capturing a discount | Xchange successfully expanded its distribution and carrier network and distributed approximately $6 million of approximately $250 millionearnings to liquidation preference, further simplifying the capital structure. |
lEnded 2018Ambac, consistent with total Ambac stockholders’ equity (“Book Value“) of $1.6 billion, or $35.12 per share, an increase from $1.4 billion or $30.52 per share at December 31, 2017, and Adjusted Book Value(1) of $1.25 billion, or $27.58 per share, an increase from $1.1 billion or $24.34 per share at December 31, 2017.
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lImproved Asset Liability Ratio from 75.7% at December 31, 2014 to 86.3% at December 31, 2017
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(1)
| Adjusted Earnings (Loss) and Adjusted Book Value are non-GAAP measures. A reconciliation of these non-GAAP financial measure and the most directly comparable GAAP financial measure is presented in Appendix A. In this Proxy Statement, we refer to Total Ambac Financial Group, Inc. stockholders' equity as "Book Value." |
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Ambac Financial Group, Inc. |31 | 2019 Proxy Statement
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Early in 2018 we successfully executed a transformational holistic restructuring transaction for the Company, the conclusion of the rehabilitation of AAC’s Segregated Account. We negotiated the terms of such transaction with a group of creditors, took actions to satisfy regulatory capital requirements, negotiated and completed numerous required documents, sought tax opinions and Private Letter Rulings from the IRS, and took numerous other actions and steps to ensure the successful conclusion of the rehabilitation of AAC’s Segregated Account. The impact of this transaction includes:
our current ownership stake. |
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Benefit | Outcome |
●Simplified Capital Structure and Greater Financial and Strategic Flexibility
| ○Discharge of all unpaid policy claims (“Deferred Amounts”) of the Segregated Account, totaling approximately $3.9 billion, including accretion
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○Cancellation of $810 million in principal plus accrued and unpaid interest of AAC general account surplus notes
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○Receipt of $240 million in new capital via the issuance of a Tier 2 note, backed by certain RMBS representation and warranty litigation recoveries
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○Merger of AAC’s Segregated Account into its general account
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○Created approximately $7.00 of Book Value per share
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●Greater Financial Strength at AAC
| ○Full payment on policy claims following the merger of the Segregated Account into AAC’s general account
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○Realization of an effective discount of 6.5% on the accreted value of Deferred Amounts and the outstanding amount of principal and accrued and unpaid interest on tendered general account surplus notes
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●Material Reduction In Ongoing Rehabilitation and Restructuring Costs and Other Related Expenses
| ○Regulatory and other costs related to the rehabilitation of the Segregated Account decreased $21 million for the year ended December 31, 2018 from the prior year
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●Unified Corporate Governance Structure
| ○Interlocking Boards at Ambac and AAC
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2018
2021 Pay Decisions
20182021 compensation decisions reflect our compensation principles:
•Link short-term incentives to Companythe Company's operational, strategic, and financial performance;
•Use long-term incentives to further align the interests of our executives with stockholders by providing that all LTIP awards are denominated in stock units;units, with payouts based on performance metrics that we believe drive long-term value for stockholders; and
•Support the retention and attraction of key executive talent.
Base salaries in 20182021 for each of our NEOs were reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. Each of Messrs. LeBlanc, Trick
In 2021, the Compensation Committee incorporated appropriate financial performance metrics related to our specialty P&C insurance business, in particular for the Everspan and Ksenak is a partyXchange platforms, into the incentive compensation plans for senior management. In 2022, the Committee increased the weightings assigned to an employment agreement withfinancial performance metrics for the Company that provides for a minimum annual base salary during the term of the respective agreement. specialty P&C insurance business.
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Ambac Financial Group, Inc. | 40 | 2022 Proxy Statement |
See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.”
STIP awards for 20182021 were determined based on a structured and objective approach in which 60%50% of an executive officer's annual STIP award was based on the Company’s achievement of pre-established financial
performance targets at the Company related to changesreductions in: (i) Net Asset Value,Par Outstanding1 in the insured portfolio, and (ii) Gross Operating Run Rate
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Ambac Financial Group, Inc. |32 | 2019 Proxy Statement
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Expense Expense;1, and (iii) Watch List and Adversely Classified Credits 1. Thethe remaining 40%50% of an executive officer's annual STIP award for 2021 was based on otherstrategic performance considerations,goals, including business unit results and individual performance. In an effort to increase the equity ownership of each of our NEOs, 25% of the annual STIP awards were paid in common stock units of Ambac with a deferred settlement provision ("DSUs"), and the remainder was paid in cash. These DSUs will settle and convert into Ambac common stock annually over a two-year period; 50% on March 4, 2020 and the remaining 50% on March 4, 2021, unless settled earlier due to an employee’s departure from the Company.
Long-term incentive awards granted in early 20182021 were also reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year. The 2021 long term incentive awards include restricted stock units (33%(40% of total long term incentive award) which vest annually over a three year period from grant date and performance stock units (67%(60% of total long term incentive award), whichtied to metrics that reflect the long term goals that the Compensation Committee believes will drive shareholder value overstockholder value. Vesting of performance stock units is subject to the satisfaction of certain performance goals, which will be determined at the end of a two year performance period, and application of the rTSR modifier at the end of three year period.years (described below).
20182021 Say on Pay Vote and Stockholder Outreach
At our 20182021 annual meeting of stockholders, our Say on Pay proposal received support from stockholders representing approximately 91%75% of our common stock present, in person or by proxy at the meeting voted to approve, on an advisory basis, the compensation of our named executive officers described in our 2018 proxy statement. Wemeeting. While we greatly appreciate the affirmative support of a significant majority of our stockholders with regard to our executive compensation program, our Compensation Committee also endeavors to understand the concerns of the minority of our stockholders who did not support our executive compensation program. We are committed to a corporate governance approach that aligns the interestinterests of management, the Board of Directors and our stockholders. In pursuit
Over the course of this approach, in the fall of 20182021, the Chairman of the Board, and the Chief Executive Officer, along with the Chairs of the Compensation Committee and the Governance and Nominating Committee solicited feedback from our stockholders representing approximately 55%63% of our outstanding common stock. The discussions involved, among other things, the event driven nature of our businessstock and corporate governance matters.from certain proxy advisory firms. These stockholders and proxy advisory firms provided criticalimportant feedback concerning our executive compensation program.
While the feedback on our executive compensation program was verygenerally favorable, a number of stockholders expressed the view thatprovided input on certain changes they would like the Company should consider addingto adopt. As a relative total shareholderresult of the feedback received from stockholders, the Compensation Committee made the following changes to the 2022 compensation program.
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WHAT WE HEARD | WHAT WE DID |
Place a greater emphasis on total stockholder return as part on of the compensation program | l | Increased the impact of the rTSR modifier from +/- 10% to +/- 20% with respect to our LTIP Awards beginning in 2022 so that any final performance stock unit ("PSU") award payout at the end of the three year performance period may be increased or decreased by 20% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. |
Provide for a three year measurement period in judging performance under the LTIP. | l | Changed the performance measurement period from two years to three years for determining the achievement of goals against pre-set metrics for 2022 LTIP awards. |
Provide enhanced disclosure around the performance considerations utilized to judge performance results under the STIP’s strategic performance goals. | l | Materially enhanced the disclosure included in the CD&A related to the performance considerations underlying the strategic performance goals and the rigor in the process utilized to judge performance pursuant the STIP. |
1 Reductions in Net Par Outstanding as of December 31, 2021 under the STIP were measured against Net Par Outstanding as of January 1, 2021. Gross Operating Run Rate Expense is measured by comparing actual gross operating run rate expenses to performance goals established against budgeted amounts.
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Ambac Financial Group, Inc. | 41 | 2022 Proxy Statement |
The Compensation Committee also made the following additional changes to the design of the 2022 compensation program, with an increased emphasis on the specialty P&C insurance business.
Changes to the 2022 Short Term Incentive Plan Design, include:
•Increase in the weighting of the financial performance metrics from 50% to 60%; and
•Inclusion of an additional financial performance metric for the specialty P&C insurance business with aggregate increased weighting.
Changes to ourthe 2022 Long Term Incentive Plan awards. After reviewDesign, include:
•Increase in the proportion of PSUs to restricted stock units ("RSUs") granted from 60%/40% to 70%/30%, respectively; and deliberation on
•Increase in the matter,weighting related to results from the specialty P&C insurance business from 25% to 40% with a corresponding reduction in weighting of performance metrics related to our legacy financial guarantee business, from 75% to 60%.
It is the intention of the Compensation Committee decidedthat as Ambac's specialty P&C insurance business continues to add a relative Total Shareholder Return ("rTSR") modifiergrow, and the legacy financial guarantee business shrinks, the Company's performance metrics will accordingly shift to our 2019 LTIP Awards.be more heavily weighted to the achievement of results in the specialty P&C insurance business.
Our Compensation Philosophy and Objectives
Our executive compensation program is designed to support achievement of our key business objectives. The Compensation Committee monitors and oversees all facets of the program, including incentive plan design, benchmarking, and the performance goal-setting process, and approves executive pay programs that tie a substantial portion of compensation to goal achievement. The Compensation Committee also retains the authority to make discretionary adjustments to further recognize overall Company performance and enhance alignment with stockholders and is committed to monitoring and adapting to evolving compensation standards. Specifically, our executive compensation program has the following objectives:
1Gross Operating Run Rate Expense is measured by comparing actual gross operating run rate expenses to performance goals established against budgeted amounts. Reductions in Watch List and Adversely Classified Credits as of December 31, 2018 under the STIP were measured against Watch List and Adversely Classified Credits as of January 1, 2018.
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Objectives | Details |
Attract, retain and motivate executives and professionals of the highest quality and effectiveness | l | Provide compensation opportunities contingent upon performance, that are competitive with practices of other similar financial services organizations operating within the same marketplace for executive talent. |
Align pay with performance | l | A substantial portion of each executive’s total compensation is variable and performance-based. |
l | The design of our incentive plans focus on rewarding performance aligned with our key business strategies. |
Further align our executives’ long-term interests with those of our stockholders | l | Balance use of cash and equity based compensation, with a greater emphasis on the latter and short and long-term incentives that further align management's interests with those of our stakeholders and support retention. |
Discourage excessive risk taking | l | Maintain policies that support good governance practices and mitigate against excessive risk taking. |
Determining Executive Compensation
The Compensation Committee bases current pay levels on numerous factors, including competitive pay practices in the financial services industry, the scope and complexity of the functions of each NEO’s role, the contribution of those functions to our overall performance, individual experience and capabilities, and individual performance. Any variations in compensation among our NEOs reflect differences in these factors. The Compensation
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Ambac Financial Group, Inc. | 42 | 2022 Proxy Statement |
Committee monitors the effectiveness of our compensation programs throughout the year and performs an annual reassessment of the programs at the beginning of the year in connection with year-end compensation decisions and future goal settings.
Compensation Consultants
The Compensation Committee has authority to retain compensation consulting firms to assist it in the evaluation of executive officer and employee compensation and benefit programs. The Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”), as its independent compensation consultant to advise on the 20182021 compensation cycle, which included year-end compensation decisions made in the first quarter of 2019.2022. Meridian provides an objective perspective as to the reasonableness of our executive compensation programs and practices and their effectiveness in supporting our business and compensation objectives. Specifically, Meridian advised the Compensation Committee with respect to compensation trends and best practices, incentive plan design, competitive pay levels, and individual pay decisions with respect to our NEOs. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC rules and concluded that no conflict of interests exists that would prevent Meridian from independently advising the Compensation Committee.
Competitive Compensation Considerations
Because the competition to attract and retain high performing executives and professionals in the financial services industry is intense, the amount and composition of total compensation paid to our executives must be considered in light of competitive compensation levels. To help inform the Compensation Committee's compensation decisions for the NEOs for 2021, Meridian prepared a benchmarking analysis that compared the compensation levels for our NEOs to that of officers in comparable positions across a selected peer group of companies. However, we do not rely on this information to target any specific pay percentile for our NEOs. Instead, we use this information to provide a general review of market pay levels and practices and to ensure that we make informed decisions regarding our executive pay programs.
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Ambac Financial Group, Inc. |34 | 2019 Proxy Statement
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To helpAt present, Ambac has no directly comparable business peers, and thus peer selection is a challenge. Each year the Compensation Committee determine compensation levelsreviews the Company's peer group and considers adjustments if appropriate. Key criteria used to assess current and potential peer companies include financial services industry sector focus (i.e., specialty insurance, specialty finance, property and casualty insurance, financial guaranty and run-off insurance), organizations that manage distressed assets, and organizations of similar size and scope (market capitalization, assets and enterprise value). Based on a review conducted in 2021 in preparation for the NEOs, Meridian prepared an analysis that compared the level of compensation for our NEOs and compensation paid to officers at comparable positions across an industry comparator group. In the 20182021 compensation cycle, we revised the list of peer companies toto: (i) be more reflective of Ambac's size, (ii) add more property and casualty insurance companies, (iii) reflect the event driven nature of our business. The companies that comprisebusiness and the comparatorrisks we face, (iv) capture the markets and businesses in which we operate and (v) reflect the market for executive talent. We expect our peer group were selected because we competecomparability will materially change in the same marketplace with these companies for highly qualifiedcoming years as we transition from our legacy financial guaranty business to our new specialty property and talented financial service professionals.casualty insurance business.
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Ambac Financial Group, Inc. | 43 | 2022 Proxy Statement |
The table below provides summary financial information regarding Ambac and the comparator group used for the 20182021 compensation cycles.
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Comparator Group used for 2021 Compensation Cycle | Primary Industry | Market Capitalization ($ in millions) | | Assets ($ in millions) | | Enterprise Value ($ in millions) |
Argo Group International Holdings, Ltd. | Property & Casualty Insurance | $1,897 | | | $10,316 | | | $2,406 | |
Assured Guaranty Ltd. | Property & Casualty Insurance | 3,593 | | | 18,208 | | | 5,170 | |
Mr. Cooper Group Inc. | Thrifts and Mortgage Finance | 3,271 | | | 14,204 | | | 16,582 | |
ECN Capital Corp.(1) | Specialized Finance | 2,010 | | | 1,146 | | | 2,325 | |
HCI Group, Inc. | Property & Casualty Insurance | 990 | | | 1,177 | | | 623 | |
MBIA Inc. | Property & Casualty Insurance | 673 | | | 4,695 | | | 4,199 | |
MGIC Investment Corporation | Thrifts and Mortgage Finance | 4,961 | | | 7,325 | | | 6,029 | |
Navient Corporation(1) | Consumer Finance | 3,479 | | | 80,605 | | | 79,817 | |
Radian Group Inc. | Thrifts and Mortgage Finance | 4,143 | | | 7,839 | | | 5,624 | |
Randall & Quilter Investment Holdings Ltd. | Insurance Brokers | 643 | | | 4,034 | | | 722 | |
PRA Group, Inc. | Consumer Finance | 1,901 | | | 4,366 | | | 4,394 | |
White Mountains Insurance Group, Ltd. | Property & Casualty Insurance | 3,309 | | | 7,001 | | | 3,738 | |
Ambac Financial Group, Inc. (2) | | $694 | | | $12,303 | | | $9,565 | |
Percentile Rank vs. Peer Group | | 10 | % | | 77 | % | | 85 | % |
Note: Financial data reflects information available as of December 31, 2021 |
Source: S&P Capital IQ |
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Comparator Group used for 2018 Compensation Cycle | | Market Capitalization ($ in millions) | | Assets ($ in millions) | | Book Value ($ in millions) |
Assured Guaranty Ltd. | | 4,284 | | 13,739 | | 6,583 |
ECN Capital Corp. | | 686 | | 2,421 | | 1,108 |
Element Fleet Management Corp. | | 2,333 | | 13,546 | | 2,145 |
Enstar Group Limited | | 3,822 | | 15,121 | | 3,505 |
MBIA Inc. | | 872 | | 8,361 | | 1,108 |
MGIC Investment Corporation | | 4,435 | | 5,678 | | 3,582 |
Navient Corporation | | 2,816 | | 104,176 | | 3,519 |
The Navigators Group, Inc. | | 2,078 | | 5,548 | | 1,232 |
Syncora Holdings Ltd. | | 335 | | 1,979 | | 648 |
Radian Group Inc. | | 4,105 | | 6,315 | | 3,489 |
Mr. Cooper Group Inc. (fka WMIH Corp.) | | 1,398 | | 17,728 | | 2,078 |
Ambac Financial Group, Inc. (1) | | 858 | | 15,093 | | 1,758 |
Percentile Rank vs. Peer Group | | 19% | | 80% | | 36% |
Note: Financial data reflects information available as of February 8, 2019. |
Source: S&P Capital IQ |
(1) Enterprise value for ECN Capital Corp. and Navient Corporation are not available on S&P Capital IQ. These values have been calculated using a 6-month average market capitalization less cash and cash equivalents, plus total debt, preferred equity and total minority interest. | |
(1)(2) Ambac's Enterprise Value includes the obligations of Variable Interest Entities for which Ambac or its subsidiaries are required to consolidate as a result of its financial guarantee insurance policies, plus its market capitalization, the value of all outstanding debt, preferred equity and total noncontrolling interests, less cash and cash and cash equivalents. | Assets include $7,347 of assets relating to Variable Interest Entities for which Ambac or its subsidiaries are required to consolidate as a result of its financial guarantee insurance policies. |
The Role of Management in Determining Pay
Generally, our Chief Executive Officer reviews the competitive compensation data for each of the other NEOs, considers both individual, departmental and Company performance, measured against financial performance metrics and strategic performance goals established at the beginning of the year, and makes a recommendation to the Compensation Committee for base salary and annual short- and long-term incentive awards. The Chief Executive Officer typically participates in Compensation Committee meetings at the Compensation Committee’s request to provide background information regarding the Company’s strategic objectives and to evaluate the performance of, and compensation recommendations for, each of the other executive officers.NEOs.
The Committee utilizes the information provided along with input from the compensation consultant and the knowledge and experience of the Committee’s members in making compensation decisions. Executive officersOur NEOs do not propose or seek approval for their own compensation. The Chairman of the Compensation Committee, with input from the Chairman of the Board of Directors, recommends the Chief Executive Officer’s compensation to the Compensation Committee. See "Directors, Executive Officers, and Corporate Governance"Governance."
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Ambac Financial Group, Inc. |35 44 | 20192022 Proxy Statement |
Elements of Pay
Compensation for each of our NEOs is viewed on a total compensation basis and comprised of the following elements of pay:
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Compensation Element | Purpose |
Base Salary | l | Provides a minimum, fixed level of cash compensation to compensate executive officers for services rendered during the fiscal year that is competitive with organizations operating within the same marketplace for executive talent. |
Short Term Incentive Awards | l | Drive achievement of annual corporate goals, including key financial and operating results by setting pre-established financial performance targets at the Company. Annual STIP awards are paid 75% in cash and 25% in deferred stock units.cash. |
Long-Term Incentives | l | Further align executive officers’ interests with the interests of stockholders by rewarding increases in the value of our share price, and tying long-term incentive compensation to performance metrics that we believe to be important value-drivers for our stockholders. LTIP awards are strictly equity based and denominated in PSUs and RSUs. |
Post-Employment Benefits | l | lProvide certain severance benefits to our executive officers. See “--Post-Employment Benefits” and for a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers."
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Perquisites | l | Provide a limited number of perquisites to all our employees, including our executive officers. |
Before any year-end compensation decisions are made, the Compensation Committee undertakes a comprehensive review of all elements of each executive officer’s compensation. This review includes information on cash and non-cash compensation for the past fourthree fiscal years (including current and prior year base salaries, short-term and long-term incentive awards and other awards), and the value of benefits and other perquisites paid to our executive officers, and the value of unrealized gains/losses on prior equity-based awards held by our executive officers, as well as potential amounts to be delivered under all post-employment scenarios. This comprehensive review is designed to ensure that each member of the Compensation Committee has a complete picture of the compensation and benefits paid to each of our executive officers.
The following table shows the base salary and incentive compensation paid to Messrs. LeBlanc, Trick, Barranco, Ksenak, and Ms. Smithour NEOs for their performance in 20182021 in the manner it was considered by the Compensation Committee. This presentation differs from that contained in the Summary Compensation Table by showing the full grant date value of the STIP and LTIP stock unit awards at targetgranted in 2022 for 2021 performance. The actual number of PSUs and RSUs granted was calculated based on March 4, 2019,an average closing price of Ambac common stock on the NYSE for the immediately preceding twenty trading days prior to the grant date, February 28, 2022 ($14.85), which were awarded based on 20182021 performance, but are not reflected in the Summary Compensation Table because of SEC rules on proxy statement disclosure.
| | | | | Short Term Incentive Plan | Long Term Incentive Plan | | | Long Term Incentive Plan | |
Name | Year | Salary ($) | Cash Incentive Award ($) | DSU Awards ($) | PSU Awards ($) | RSU Awards ($) | Total ($) | Name | Year | Salary ($) | Short Term Incentive Plan ($) | PSU Awards ($) | RSU Awards ($) | Total ($) |
Claude LeBlanc | 2018 | 900,000 |
| 1,170,000 |
| 390,000 |
| 1,809,000 |
| 891,000 |
| 5,160,000 |
| Claude LeBlanc | 2021 | 900,000 | 1,699,000 | 2,677,512 | 1,147,488 | 6,424,000 |
David Trick | 2018 | 750,000 |
| 433,500 |
| 144,500 |
| 318,250 |
| 156,750 |
| 1,803,000 |
| David Trick | 2021 | 750,000 | 659,000 | 647,500 | 277,500 | 2,334,000 |
David Barranco | 2018 | 500,000 |
| 270,000 |
| 90,000 |
| 318,250 |
| 156,750 |
| 1,335,000 |
| David Barranco | 2021 | 500,000 | 688,000 | 595,000 | 255,000 | 2,038,000 |
Stephen M. Ksenak | 2018 | 600,000 |
| 298,500 |
| 99,500 |
| 268,000 |
| 132,000 |
| 1,398,000 |
| Stephen M. Ksenak | 2021 | 600,000 | 596,000 | 525,000 | 225,000 | 1,946,000 |
R. Sharon Smith | 2018 | 450,000 |
| 237,750 |
| 79,250 |
| 268,000 |
| 132,000 |
| 1,167,000 |
| R. Sharon Smith | 2021 | 500,000 | 612,000 | 577,500 | 247,500 | 1,937,000 |
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Ambac Financial Group, Inc. |36 45 | 20192022 Proxy Statement |
Pay Mix
A substantial portion of target total compensation is delivered through variable performance or equity based incentives that are at risk. As reflected in the table above and the graphs below, variable performance or equity based incentives constitute 83%86% of our CEO compensation mix and 60%72% of our NEO compensation mix.
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CEO Total Direct Compensation | | CEO Performance/Equity Based Incentive Compensation |
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Other NEOs Total Direct Compensation | | Other NEOs Performance/Equity Based Incentive Compensation |
Base Salary.Base salaries are intended to reflect the experience, skill and knowledge of our executive officers and other senior professionals in their particular roles and responsibilities, while retaining the flexibility to appropriately compensate for fluctuations in performance, both of the Company and the individual. Base salaries for our executive officers and any subsequent adjustments thereto are reviewed and approved by the Compensation Committee annually, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. The base salaries paid in 20182021 to each of our NEOs was: $900,000was unchanged from prior years. Mr. LeBlanc received a base salary of $900,000; Mr. Trick, $750,000; Mr. Barranco, $500,000; Mr. Ksenak, $600,000; and Ms. Smith, $500,000. Each of Messrs. LeBlanc, Trick and Ksenak is a party to Mr. LeBlanc; $750,000 to Mr. Trick; $500,000 to Mr. Barranco; $600,000 to Mr. Ksenak; and $450,000 to Ms. Smith.an employment agreement with the Company that provides for a minimum annual
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Ambac Financial Group, Inc. |37 46 | 20192022 Proxy Statement |
base salary during the term of Contents
the respective agreement. See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.”
Incentive Compensation.Incentive compensation is a key component of our executive compensation strategy. Our incentive compensation awards generally have two components: short term incentive compensationShort Term Incentive Plan awards (consisting of an annual cash incentive award and deferred stock units or DSUs)award) and Long Term Incentive Plan awards. Annual decisions with regard to incentive compensation are generally made in February of each year, following Compensation Committee meetings in December and January.year. Incentive compensation payouts can be highly variable from year to year.
Short Term Incentive Compensation. Annual incentives for our NEOs are meant to reward performance. SixtyFifty percent of ourNEO 2021 short term incentive compensation awards arewere measured against pre-established financial performance targets at the Company related to:to reductions in: (i) increasesNet Par Outstanding in net asset value,the insured portfolio and (ii) reductions in gross operating run rate expenses, and (iii) reductions in Watch List and Adversely Classified Credits.Gross Operating Run Rate Expenses. These metrics were chosen because the Compensation Committee believesbelieved that they arewould be key drivers of stockholder value. value in 2021.
The remaining fortyfifty percent of the short term incentive compensation award is based on otherstrategic performance considerations,goals, more than 50% of which can be reviewed against objective, quantifiable or financial outcomes. These goals include formula driven financial performance targets as well as strategic goals related to:
•Active de-risking and ongoing rationalization of Ambac's capital and liability structures;
•Increasing organizational effectiveness and efficiency of the operating platform;
•Effective management of loss recovery through active litigation and exercise of contractual and legal rights; and
•Identification of potential actionablenew business opportunities to engage and pursue that meet Board approved criteria, including business unit resultsperformance and individual performance. growth expectations for the new specialty P&C insurance business. See "Compensation for Each of Our Named Executive Officers in 2021 - Strategic Performance Goals."
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Ambac Financial Group, Inc. | 47 | 2022 Proxy Statement |
The Compensation Committee believes that it is important to retain a substantial level of discretion with respect to otherestablish strategic performance considerationsgoals because of the uncertainties associated with our mainlegacy operating subsidiary,subsidiaries, AAC and Ambac UK, which isare not writing new business. Our inability to pay discretionary annual incentive awards could have a material adverse impact onbusiness and are in runoff, and Ambac’s strategic shift towards growing our ability to attract, motivate and retain high-quality and talented executives.specialty P&C insurance platform. The Compensation Committee assigns to each NEO an annual target incentive opportunity, expressed as a percentage of eligible earnings (base salary amount paid during the year), which is based on the executive’s position and the scope of responsibilities.
Target annual incentives (as a percent of base salary) for the NEOs arefor 2021 were set as follows: 100%125% for the Chief Executive Officer; and between 55% for the Chief Financial Officer; and 50%85% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for the Chief Executive Officer, and from 0% to 150%each of target for the other NEOs based on the Compensation Committee’s review of overall corporate performance and individual and business unit achievement relative to the pre-established goals and objectives set forth above.objectives.
In order to increase equity ownership levels among our NEOs and to further align management and stockholder interests, 25% of the annual STIP awards are paid in vested common stock units of Ambac with a deferred settlement provision, and the remainder is paid in cash. The DSUs granted as part of the year-end 2018 STIP Awards will settle and convert into Ambac common stock annually over a two-year period; 50% in March 2020 and the remaining 50% in March 2021, unless settled earlier due to an employee’s departure from the Company. | | |
Key Changes in 2022 to Short Term Incentive Program: For the 2022 performance year, the Compensation Committee amended the financial performance metrics of the STIP to include Everspan performance, weighed at 20%, along with reductions in Net Par outstanding in the insured portfolio, weighed at 60%, and Gross Operating Run Rate Expenses, weighed at 20%. In addition, the Committee also increased the weighting of the STIP financial performance metrics from 50% to 60%. |
Long Term Incentive Compensation. Our LTIP awards focus on the attainment of long term performance goals and objectives, which are deemed instrumental in creating long term value for stockholders and long term retention incentives for our executives. The Compensation Committee reviews the LTIP targets each year for competitive alignment. The Compensation Committee also reviews market trends related to the award mix and determines the appropriate mix of equity instruments considering market benchmark data.
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Ambac Financial Group, Inc. | 48 | 2022 Proxy Statement |
In the first quarter of each year, LTIP compensation awards (which related(the size of which relates to the prior year's performance) are granted to our NEOs. In 2018, we eliminated2021, the "retesting" feature inCompensation Committee revised the Long-Term Incentive Compensation Program that allowedLTIP performance at AACmetrics to be measured bybetter align management's goals with certain key drivers of stockholder value: risk reduction and managing the greaterevent driven nature of two metrics: an improved asset liability ratio ("ALR") or improved net asset value ("NAV") over a three year performance period.Ambac's business. LTIP awards granted in 2018 that relate to AAC performance2021 will be measured based on (i) reductions in Watch List and Adversely Classified Credits at AAC weighted at 42.5%75% and (ii) improvements in NAV weighted at 42.5%. The portion of the 2018 LTIP award that relates to Ambac performance will be measured based on the achievement of a certain level Cumulativecumulative EBITDA andtargets at Xchange weighted at 15%25%. In addition, the 2021 LTIP awards in 2018 were denominated 67% incontinued to incorporate the Total Shareholder Return ("rTSR") modifier as an additional metric with respect to performance based LTIP award payouts. The rTSR modifier for 2021 LTIP awards will cause any final PSU award payout at the end of a three year settlement period to be increased or decreased by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. While the payout of performance stock units (“PSUs") granted pursuant to the 2021 LTIP awards will not settle or be subject to the rTSR modifier until the end of a three year period, the measurement period for determining the achievement of goals against the pre-set metrics was shortened to two years, consistent with the prior year awards, to create a better alignment between Company performance and 33%management compensation.
LTIP awards in 2021 were denominated 60% in PSUs and 40% in restricted stock units ("RSUs"). PSUs represent a promise to deliver, within 75 days after the end of a three-year performance period, a number of shares of Ambac’s common stock ranging from 0% to 200% (not including any adjustment that may be applied pursuant to the rTSR modifier) of the amount of the initial grant, depending on the achievement by either Ambac or its principal operating subsidiary, AAC, of financial performance objectives determined by the Compensation Committee at the time of the grant. The RSUs are time basedtime-based awards and were granted in order to encourage the retention of our most valued employees. The RSUs granted as part of the 20182021 LTIP awards represent the right to
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Ambac Financial Group, Inc. |38 | 2019 Proxy Statement
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receive an equivalent number of shares of Ambac’s common stock and will vest and settle in three equal annual installments in March of 2019, 2020,2022, 2023 and 2021.2024.
The Compensation Committee determined the target value of the 20182021 LTIP awards granted to Messrs. Trick, Barranco, Ksenak, and Ms. Smitheach of our NEOs based on the Company’s overall results, the individual executive’s contribution to overall performance, external market benchmark data and the proportion of total compensation comprised of LTIP awards. In addition, in setting target value of the 20182021 LTIP awards granted to Messrs. LeBlanc, Trick and Ksenak, the Committee considered the terms and conditions set forth in their respective employment agreements. See "Agreement with Claude LeBlanc," and "Agreements with Other Executive Officers.”
For each of our NEOs, the Compensation Committee determined to weight the LTIP awards granted in March 2018 as follows: 85% of the award based on performance at AAC (an “AAC LTIP Target Award”) and 15% of the award based on performance at Ambac (an “Ambac LTIP Target Award”).
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Key Changes to Long Term Incentive Program for 2022 LTIP Grants: The Compensation Committee revised the PSU performance metrics to add Everspan EBITDA goals. PSU awards granted in 2022 will be measured based on performance, with reductions in Watch List and Adversely Classified Credits at AAC weighted at 60% and the achievement of certain EBITDA goals at Xchange and Everspan each weighted at 20%. LTIP awards in 2022 were denominated 70% in PSUs and 30% in RSUs. |
In 2019, we addedaddition, the Compensation committee re-instituted a relative Total Shareholder Return ("rTSR") modifierthree-year performance and measurement period for determining the achievement of goals against pre-set metrics for 2022 LTIP awards given the shift in metrics towards our new businesses, as an additional metric with respect to our LTIP award payouts. The rTSR modifier will cause any final PSU award payout at the end of a three year performance period to be increased or decreased by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.well as certain shareholder feedback. |
AAC LTIP Metric. Metrics. The metrics used to judge performance at AAC for LTIPPSU awards granted in March 20182021 are reductions in Watch List and Adversely Classified Credits2 at AAC and an improved net asset value ("NAV")the achievement of certain EBITDA goals at Xchange, each measured over a three-year performancetwo-year period which runs from January 1, 20182021 until December 31, 20202022 (the “Performance“Measurement Period”). Within the AAC performance metrics, each individual metric is weighted at 42.5% and is intended to reward participants for reductionsReductions in AAC's Watch List and Adversely Classified Credits are weighted at 75% and increasesthe achievement of certain EBITDA goals at Xchange is weighted at 25%.
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2 Adversely Classified Credits represent credits that are either in the value of AAC's net assets.default or have developed problems that eventually may lead to a default. Watch List credits represent credits that demonstrate heightened potential for future adverse development based on qualitative and quantitative stress assumptions.
The NAV is calculated by reducing Assets by Liabilities, determined as of the last day of the performance period.
For purposes of the NAV calculation, “Assets” shall mean the sum of (i) cash, (ii) invested assets at fair value (except for Ambac-insured investments which will be measured at amortized cost and excluding the Secured Note issued in 2018 in connection with AAC's restructuring as it is included in liabilities), (iii) loans, (iv) investment income due and accrued, (v) net receivables (payables) for security sales (purchases), (vi) tax tolling payments or dividends made by AAC to Ambac during the Performance Period, (vii) cash pledged as collateral to derivative counterparties, and (viii) other receivables; and
“Liabilities” shall mean the sum of the following: (i) the present value of future probability weighted financial guarantee claims and CDS payments reduced by recoveries, including probability weighted estimated subrogation recoveries and reinsurance recoverables, using discount rates in accordance with GAAP ("Gross Claim Liability" or "GCL"), (ii) fair value of all interest rate derivatives (prior to any AAC credit valuation adjustments), (iii) par value and accrued interest of all outstanding surplus notes of AAC (including junior surplus notes), (iv) par value and accrued interest on the Ambac Note and Tier 2 debt issued in 2018 in connection with AAC's restructuring (net of par value and accrued interest on AAC's holdings of the Secured Note), (v) the liquidation value of outstanding preferred stock, and (vi) the GAAP carrying value of RMBS secured borrowings, and any such similar borrowings of AAC.
Additionally, the Net Asset Value will: (i) neutralize the effects of claim payments, loss expense payments, advisor payments and the establishment of loss and loss expense reserves for credits that do not have a GCL, (ii) measure AAC's foreign subsidiaries utilizing the foreign exchange rate at the beginning of the performance period, (iii) add back costs related to AAC restructuring or ongoing OCI oversight during performance period, and (iv) add back direct costs of risk remediation activities with respect to credits within Watch List or Adversely Classified Credits.
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Ambac Financial Group, Inc. |39 49 | 20192022 Proxy Statement |
The following table sets forth the percentage of the AAC2021 LTIP Target Award that each of our named executive officers could earn under the 20182021 LTIP awards based on improvements in NAV and on reductions in Watch List and Adversely Classified Credits determinedand Cumulative Xchange EBITDA3 as of the last day of the PerformanceMeasurement Period.
| | Percentage of AAC LTIP Target Award Earned | | NAV ($ in millions)(1) | | Watch List and Adversely Classified Credits ($ in billions)(1) | Percentage of AAC LTIP Target Award Earned | | Cumulative Xchange EBITDA ($ in millions) (1) | | Watch List and Adversely Classified Credits ($ in billions) (1) |
200% | | $(300) | | $15.50 | 200% | | $17.1 | | $9.135 |
100% | | $(500) | | $16.60 | 100% | | $13.7 | | $9,735 |
0 | | $(650) | | $18.80 | 0 | | $10.3 | | $10.635 |
(1) Linear interpolation between levels of NAV and Watch List and Adversely Classified Credits will result in a proportionate amount of the AAC LTIP Target Award becoming earned and vested. | |
Ambac LTIP Metric.(1) The metric used to judge performance at Ambac for LTIP awards grantedLinear interpolation between levels of Cumulative Xchange EBITDA and Watch List and Adversely Classified Credits will result in March 2018 is Cumulative EBITDA over the Performance Period. Ambac’s "Cumulative EBITDA" means Ambac’s earnings before interest, taxes, depreciation, amortization, and non-controlling interests (as determined under GAAP) for the Performance Period. The choicea proportionate amount of the Cumulative EBITDA metric is intended to reward participants on generating income from all of Ambac's subsidiaries excluding AAC and its subsidiaries.
Cumulative EBITDA shall be adjusted for the effects of: (i) advisor and deal/transaction related costs related to capital and/or merger and acquisition transactions above budgeted amounts, (2) cost of post-employment guarantees, (iii) cost and impact of AAC and Ambac share repurchases, (iv) changes to Board fees and Board imposed expenses, (v) litigation and defense costs and any potential litigation gains in excess of damages incurred, (vi) (cost)/benefit of performance based compensation (above) or below target amounts, and (vii) any other costs as determined in the sole discretion of the Board.
The following table sets forth the percentage of the Ambac LTIP Target Award that each of our NEOs could earn under the 2018 LTIP awards based on the Cumulative EBITDA achieved over the Performance Period, determined as of the last day of the Performance Period.
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Ambac’s Cumulative EBITDA ($ in millions) (1) | Percentage of Ambac LTIP Target Award Earned |
$30.0 | 200% |
$17.0 | 100% |
$0 | 0% |
(1) Linear interpolation between levels of Cumulative EBITDA will result in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested. |
becoming earned and vested.Following the end of the Performance Period, the Compensation Committee will determine the extent to which each participant’s LTIP award has been earned and the amount payable. The Compensation Committee may, in the exercise of its discretion, reduce the amount of any LTIP award that otherwise would have been earned based on the satisfaction of the performance metrics, but may not increase the size of any LTIP award.
The purpose of the LTIP awards is to further align the long-term interests of our NEOs with those of our stockholders. We believe we have achieved this by making the vesting of the LTIP awards conditional upon Ambac and AAC achieving certain milestones that the Company believes will have a positive effect on the future value of our common stock. In addition, the ultimate value of the PSUs and RSUs directly depends on the value of our common stock at the time of vesting. Each individual who receives a PSU or RSU becomes, economically, a long-term stockholder of the Company, with the same interests as our other stockholders. As a result, we believe our NEOs have a demonstrable and significant interest in increasing stockholder value over the long term.
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3 Cumulative Xchange EBITDA is calculated by taking 80% of Xchange Group’s earnings before interest, taxes, depreciation and amortization (consistent with Xchange’s historical accounting framework) through the Measurement Period. Cumulative Xchange EBITDA shall be adjusted to exclude the impact of retention payments to Xchange employees in connection with the acquisition by Ambac; purchase accounting; without duplication, EBITDA or any costs related to any M&A transaction consummated during the Measurement Period; cost allocations; and any other adjustments as determined in the sole discretion of the Committee.
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Ambac Financial Group, Inc. |40 50 | 20192022 Proxy Statement |
Compensation for Each of Our Named Executive Officers in 20182021
Our Chief Executive Officer
Mr. LeBlanc. Effective January 1, 2017, Claude LeBlanc was appointed President and Chief Executive Officer of Ambac and AAC. The Board believed that Mr. LeBlanc's significant experience and success over his career holding senior leadership functions overseeing strategy, corporate development, finance and risk, as well as his prior role actively leading the global remediation and asset recovery initiatives at Syncora Holdings Ltd., and evaluating strategic alternatives and overseeing all aspects of Syncora's finance function, made him uniquely qualified to lead Ambac. Following extensive negotiations, theThe Compensation Committee, which received input and advice from its nationally recognized independent compensation consultant, Meridian Compensation Partners, LLC, authorized the Company to enter into an employment agreement with Mr. LeBlanc on December 8, 2016.2016, and amended on February 26, 2020. Pursuant to the employment agreement, as amended, Mr. LeBlanc wasis paid an annual base salary of $900,000, and his$900,000. The employment agreement also provides that Mr. LeBlanc is eligible to receive (i) a target and maximum annual STIP award amounts were set at no less than 100% and 200% of his base salary respectively,and (ii) a target annual long-term incentive award set at no less than 150% of his base salary, as determined in the discretion of the Compensation Committee.
STIP awards consistThe Short Term Incentive Plan is a blend of an annual cash incentive awardfinancial performance metrics and a deferred stock unit (“DSU”) grant determinedstrategic performance goals, approximately 75% of which are, in the discretion ofaggregate, objective and/or quantifiable. These goals include formula driven financial performance targets as well as strategic goals to de-risk the Compensation Committee. Sixtyinsured portfolio; effectively manage loss recovery through litigation; increase organizational effectiveness; and identify and pursue new business opportunities that meet Board approved criteria.
Fifty percent of the STIP award paid to Mr. LeBlanc for 20182021 was based on the achievement of the financial performance metrics related to reductions in (i) Net Par Outstanding in the insured portfolio weighted at 80% and (ii) Gross Operating Run Rate Expenses weighted at 20%.
The remaining 50% of the STIP award paid to Mr. LeBlanc was based on the achievement of strategic performance goals set forth below that were established by the Compensation Committee atfor both the beginning of 2018. The relative weighting for eachlegacy financial guaranty business and the new specialty P&C insurance business. A majority of these financialstrategic performance metrics was as follows: improvementsgoals are objective and/or quantifiable.
Given Ambac’s strategic shift towards growing our specialty P&C insurance platform and the uncertainties associated with our legacy operating subsidiaries, AAC and Ambac UK, which are not writing new business and are in Net Asset Value 15%; reductionsrunoff, the Compensation Committee decided to give equal prominence to these strategic performance goals in gross operating run rate expenses 15%; and reductions in Watch List and Adversely Classified Credits 30%.2021.
Performance Against STIP Metrics. Mr. LeBlanc’s target STIP was set at $1,125,000.On a blended basis, weighting the financial performance metrics at 50% and the strategic performance goals at 50%, Mr. LeBlanc's STIP award multiplier was set at 1.51x target, and he was granted a 2021 STIP award of $1,699,000, which was a decrease from his 2020 STIP award of $1,795,500, which was based on a multiplier of 1.6x target. Described below are the metrics, performance goals and final measured outcomes used in determining Mr. LeBlanc’s award.
For the 20182021 fiscal year, we established the following goalstargets for each of our STIP financial performance metrics and assigned athe following weighting factor as follows:factors:
| | ($ in millions) | Weighting Factor | Threshold | Target | Maximum | ($ in millions) | Weighting Factor | Threshold ($ in millions) | Target ($ in millions) | Maximum ($ in millions) |
Watch List and Adversely Classified Credits | 30% | $22.9 | $21.9 | $20.9 | |
Net Par Outstanding | | Net Par Outstanding | 80% | $30,250 | $29,540 | $28,940 |
Gross Operating Run Rate Expenses | 15% | $17.6 | $17.0 | $16.4 | Gross Operating Run Rate Expenses | 20% | $17.2 | $16.7 | $16.4 |
Net Asset Value | 15% | $(265) | $(230) | $(205) | |
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Ambac Financial Group, Inc. |41 51 | 20192022 Proxy Statement |
The following graph/charts shows the Company's 20182021 actual performance compared to the threshold, target and maximum achievement levels as established for each of the financial performance metrics.
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Watch List and Adversely
Classified Credit Net Par
| | Gross Operating
Run Rate Expenses
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Net Asset Value
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Net Par Outstanding | | Gross Operating Run Rate Expenses |
| | | | | | | | | | | | | | | | | | | | | | | |
| Target | | Threshold | | Target | | Maximum | - - - ------- | Actual |
With respect to the reductions in Watch List and Adversely Classified Credits and improvements in Net Asset Value,each of these metrics, under Mr. LeBlanc's leadership in 2018,2021, Ambac exceeded the maximumtarget performance goal set for each of these metrics. Credits that were onreducing Net Par Outstanding and achieved the watch list or adversely classifiedtarget performance goal for reducing Gross Operating Run Rate Expenses during the relevant period. Ambac's Net Par Outstanding at the beginning of the performance period wereof $33.89 billion was reduced to $19.8 billion net par outstanding, and Net Asset Value at year-end was was $186.3 million. Reductions in gross operating run rate expenses$27.87 billion. Gross Operating Run Rate Expenses for the fourth quarter of 20182021 were reduced to $16.9$16.6 million. Applying the appropriate weighting to each performance metric as set forth above and using the the appropriate payout levels for STIP awards under Mr. LeBlanc's employment agreement, the Committee assigned a 1.7951.80 multiplier to the financial performance portion of Mr. LeBlanc's 2018target STIP award.award for 2021.
OtherStrategic Performance Considerations. Goals. In determining the other fortyfifty percent of Mr. LeBlanc's 20182021 STIP award, the Compensation Committee gave consideration to the followingCompany’s results against the strategic performance goals and objectives,described below, which were communicated to Mr. LeBlanc in the first quarter of 2018:2021.
PursueFor each of these performance goals the Compensation Committee assigned a relative weighting based on the current importance of such performance goals to the Company, with an aggregate total weighting of 100%. To assess results against these performance goals, the Committee utilized a definitive score card methodology to achieve a consistent, formula driven ratings process. Score results were determined by the Committee for each category and could range from 0-5, with 0 to 1 indicating results that were below the anticipated outcomes; a score between 2 and 3 indicating results were slightly below to slightly above the anticipated outcomes; and a score between 4 and 5 indicating results that exceeded or far exceeded the anticipated outcomes.
The strategic performance goals for each category can be further bifurcated between (i) objective, quantifiable or financial performance goals to which the defined scorecard methodology is applied and (ii) well defined strategic goals relating to key components of the Company’s reported strategic priorities, to which the defined scorecard methodology is also applied.
Strategic goals related to “active de-risking and ongoing rationalization of Ambac's and its subsidiaries' capital and liability structures;
Effectivestructures” as well as “increasing organizational effectiveness and efficiency of the operating platform” were given a combined 25% weighting, of which approximately 44% were reviewed against objective, quantifiable or financial outcomes. The remaining 75% weighting was attributable to strategic goals related to “effective management of loss recovery through active litigation and exercise of contractual and legal rights;
Continue to increase organizational effectiveness, efficiency of the operating platformrights" and simplification of business controls, policies and procedures without increasing operational risk; and
Develop structured process to pursue opportunities in certain business sectors; source and evaluate potential new business opportunities for Ambac.
In reviewing each of these performance goals and objectives the Committee considered the following individual achievements in determining the amount of Mr. LeBlanc's 2018 STIP Award:
Successful runoff of AAC and its subsidiaries through active and material transaction terminations, policy commutations, execution of reinsurance transactions, settlements and restructurings;
Consolidated net par reduction of 25% or $15.8 billion in 2018 to $46.9 billion as of December 31, 2018;
Adversely Classified and Watch List Credit reduction of 21% in 2018 from $25.2 billion to $19.9 billion as of December 31, 2018;
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Ambac Financial Group, Inc. |42 52 | 20192022 Proxy Statement |
“identification of potential actionable new business opportunities to engage and pursue that meet Board approved criteria,” including performance and growth expectations for the new specialty P&C insurance business. More than 50% of the strategic goals in these categories were reviewed against objective, quantifiable or financial outcomes.
After measuring and calculating the actual results against the strategic goals outlined herein, some of which are set forth below, the Committee utilized the pre-defined scorecard methodology to arrive at a performance rating for each category. The performance ratings were then applied against the pre-determined weightings outlined herein to arrive at a formulaic outcome for each executive that was not subject to any override or adjustments.
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Strategic goals related to active de-risking and ongoing rationalization of Ambac's capital and liability structures, as well as organizational effectiveness were weighted at 25%, and included among other things |
Goals | Results |
✓ Active runoff of AAC and its subsidiaries through transaction terminations, policy commutations, settlements and restructurings, with a focus on watch list credits and adversely classified credits. | ◦Total net par down $5.9 billion or 17% through December 31, 2021 (compared with an 11% reduction in full year 2020); ◦Watch List and Adversely Classified Credits’ down $3.0 billion or 23% through December (compared with an 8% reduction in full year 2020); and ◦Settlements reached (via Plan Support Agreements) on all remaining Puerto Rico exposures ($980 million in net par). |
✓ Ongoing monitoring, evaluation and, to the extent possible, active remediation of credits impacted by the COVID-19 pandemic. | ◦Rigorous oversight of COVID-19 affected credits with active management to eliminate several more significantly impacted credits, including the Mets Queens Ballpark transaction ($531 million in net par) and a public finance hotel occupancy tax transaction ($94 million in net par); and ◦No policy claims paid related to COVID-19. |
✓ Evaluate and, as appropriate, execute Alternative Risk Transfer and reinsurance options to manage risk in the insured portfolio. | ◦Significant and material de-risking reinsurance and refinancing transactions completed in 2021, including two public finance reinsurance transactions (ceded an aggregate of $1.376 billion in net par), and reinsurance for a structure finance transaction (ceded $263 million in net par). |
✓ Evaluate and develop plan for refinancing of Ambac Secured Notes (LSNI). | ◦Successfully refinanced the LSNI secured debt with the Sitka secured debt with lower coupon and extended maturity. |
✓ Complete exchange of Corolla notes and junior surplus notes for senior surplus notes. | ◦Successfully executed the Corolla note and certificate exchange capturing nominal discount/debt reduction of approximately $73 million; and ◦Successfully executed the landlord junior surplus note exchange capturing nominal discount/debt reduction of approximately $4 million. |
✓ Increasing organizational effectiveness and efficiency of Ambac’s operating platform. | ◦Successful integration of Xchange and Everspan; ◦Bolstering of Ambac's existing infrastructure framework to improve overall resilience to cyberattacks; and ◦Strengthening of disaster recovery protocols. |
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Ambac Financial Group, Inc. | 53 | 2022 Proxy Statement |
Strategic goals related to new business activities, and litigation strategy were weighted at 75%. Some of Contents
Entered into two significant reinsurance transactions reinsuring $1.6 billion in aggregate of AAC’s insured portfolio;
Resolution of Military Housing dispute via execution of Settlement Agreement for severalthe key exposures;
Execution of Plan Support Agreement to resolve COFINA Title III case; COFINA was Ambac’s largest exposure in Puerto Rico;
Successfully executed the Auction Market Preferred Shares exchange transaction resulting in a discount capture of 45% or approximately $250 million;
Executed additional headcount and other cost reductions which, together with measures implemented in late 2017, resulted in a 27% reduction in headcount and a lower run-rate for operating expenses;
Completed the restructuring of two centers of excellence with Risk Management and Surveillance groups across both Ambac US and Ambac UK working collaboratively and in an integrated structure to develop and execute targeted strategies to address known and potential future loss transactions;
Established highly functioning Corporate Development Groupcriteria used to evaluate performance for new business opportunities;activities included the following: the successful launch of Ambac’s specialty P&C insurance platform following Everspan Group’s receipt of an A- rating and
Identified Class VIII designation from AM Best in February 2021; and filled key corporate development line functionsthe successful build out of Everspan Group via (i) license expansions (currently authorized with full admitted P&C authority, in 50 domestic states and created informal advisory group.territories) and (ii) successful acquisition of an admitted “shell” carrier in 2021.
The Committee considered each of the strategic performance goals and objectivesoutlined above in evaluating Mr. LeBlanc's overall performance, and concluded that on an aggregate basis he had exceeded target expectations and assigned a 1.640score from 0-5 for each goal and then applied the scores to the relative weightings assigned to the performance goals at the beginning of 2021 to arrive a 1.22 multiplier to the discretionarystrategic performance goals for Mr. LeBlanc's target 2021 STIP award. Weighting this multiplier equally with the 1.80 multiplier applicable to the financial performance portion of Mr. LeBlanc's 2018target STIP award. On a blended basis weighting the discretionary performance metrics at 40% and financial performance metrics at 60%,award for 2021 produced an overall multiplier of 1.51 times target for Mr. LeBlanc's 2021 STIP award.
LTIP Award. In addition to his STIP award, multiplier was set at 1.733 x target, and he was granted a 2018 STIP award of $1.56 million, consisting of a cash incentive award of $1,170,000 and a DSU award of valued at $390,000. In addition, Mr. LeBlanc received an LTIP award denominated 100% in stock units with an aggregate target value of $2.7 million (the maximum award in accordance with his employment agreement)$3,825,000, primarily reflecting Mr. LeBlanc's outstanding performance in,leadership and focus on executing the Company's strategic priorities through the challenges and uncertainties of 2021, including, among other things, concluding the exit of AAC's segregated account from rehabilitation, further rationalizationthings:
•Material advancement and growth of the Company's capital and liability structure throughCompany' specialty P&C insurance business with the executionestablishment of the Auction Market Preferred Shares exchange transactionEverspan Group of companies
◦Financial strength rating of 'A-' (Excellent) from AM Best,
◦Expanded to include an E&S carrier and leadingfive admitted carriers, one of which was added in 2021, and
◦Fully licensed with certificates of authority in 50 domestic states and territories;
•The effective support and integration of Xchange Benefits, LLC, acquired at the end of 2020; and
•Leading the Ambac management team in significantly de-risking the insured portfolio as exemplifiedand rationalizing the Company’s capital structure, resulting in material expense savings to the resolutionCompany.
Any payout under the 2022 LTIP awards is completely formula driven based on the achievement of objective and quantifiable financial performance metrics against pre-set targets at the COFINA Title III case.end of a three-year performance period. The Compensation Committee believes it struck the right balance between paying for current performance, on the one hand, and the desire to keep Mr. LeBlanc focused on the Company’s long-term performance and continued growth, on the other hand.
Other Named Executive Officers
Performance Against STIP Performance Metrics and OtherStrategic Performance Considerations.Goals.
The Committee reviewed the Company's actual performance against each of the financial performance metrics set forth above, and after applying the appropriate weighting to each metric, the Committee assigned a 1.398the same multiplier as that of Mr. LeBlanc to the financial performance portion of each NEOs 2018NEO's 2021 STIP award (other than Mr. LeBlanc). In determining the other fortyfifty percent of the 20182021 STIP award for each of the NEOs (other than Mr. LeBlanc), Mr. LeBlanc reviewed with the Compensation Committee the performance of each of the other NEOsNEO individually and their overall contribution to the Company in 2018.2021.In this process, Mr. LeBlanc assigned the same strategic performance goals and objectives to each of the NEOs that were assigned to him by the Compensation Committee, but individually adjusted the relative weighting based on each executive officer's areas of responsibility and influence. In addition, Mr. LeBlanc utilized the same score card approach as the Committee in his evaluation of each NEO in an effort to achieve a consistent ratings process. Based on the recommendation of Mr. LeBlanc, the Committee approved the 20182021 STIP awards and 20192022 LTIP awards granted to each of Messrs. Trick, Barranco and Ksenak, and Ms. Smith. In addition,Smith, as shown in the Committee approved an increase effective January 1, 2019table in Ms. Smith's annual base salary from $450,000 to $500,000.the section entitled
"Elements of Pay."
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Ambac Financial Group, Inc. |43 54 | 20192022 Proxy Statement |
Performance against 20152018 LTIP metrics.
In 2015,2018, we established the following three year goals for each of our LTIP performance metrics and assigned weighting factors based on each NEOs areas of responsibility.
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At AAC | | At Ambac | Percentage of Target Award Earned |
Net Asset Value (1) ($ in millions) | Watch List and Adversely Classified Credits Outstanding(1) ($ in billions) | | Cumulative EBITDA (1) ($ in millions) |
|
$(300) | $15.5 | | $30 | 200% |
$(500) | $16.6 | | $17 | 100% |
$(650) | $18.8 | | $— | —% |
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At AAC the Greater of | At Ambac | Percentage of Target Award Earned |
Asset to Liability Ratio (1) | Net Asset Value (1) ($ in millions) | Cumulative EBITDA (1) ($ in millions) |
100% | $0 | $19 | 200% |
95% | $(299) | $16 | 175% |
90% | $(611) | $13 | 150% |
85% | $(940) | $9 | 125% |
80% | $(1,289) | $6 | 100% |
75% | $(1,661) | $3 | 50% |
70% | $(2,061) | $— | 0% |
(1) Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested. | |
(1) | Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested. |
At AAC performance is judged based on the higher of the Asset to Liability Ratio or the(i) increases Net Asset Value (this dual testing feature was eliminatedweighted at 42.5% and (ii) reductions in 2018)Watch List and Adversely Classified Credit net par outstanding weighted 42.5%. ForAt Ambac performance is judged based on cumulative EBITDA over the three years ended December 31, 2017, the measure of the Asset to Liability Ratio exceeded the measure of Net Asset Value.performance period. The following graph/charts shows the Company's actual performance over the three year performance period running from January 1, 20152018 through December 31, 2017,2020, compared to the achievement levels set forth in the chart above.
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| AAC Adjusted Net Asset to Liability Ratio Value | | Watch List & Adversely Classified Credits Outstanding | | Ambac Cumulative EBITDA
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Ambac Financial Group, Inc. |44 | 2019 Proxy Statement
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The following table shows shows the grant date value of the 20152018 LTIP awards granted to each of our NEOs (other than Mr. LeBlanc and Ms. Smith, who were not employees of Ambac at that time) and the amounts realized upon vesting and settlement.
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Named Executive Officer | Grant Date PSU Award at Target # | Weighting between AAC/ Ambac | Payout Percentage | Shares Acquired on Vesting and Settlement # |
Claude LeBlanc | 119,284 | 85% / 15% | 200% | 238,568 |
David Trick | 17,672 | 85% / 15% | 200% | 35,344 |
David Barranco | 13,254 | 85% / 15% | 200% | 26,508 |
Stephen M. Ksenak | 14,358 | 85% / 15% | 200% | 28,716 |
R. Sharon Smith | 13,254 | 85% / 15% | 200% | 26,508 |
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Named Executive Officer | Grant Date Award at Target | Weighting between AAC/Ambac | Payout Percentage | Vesting and Settlement |
PSU Award # | Cash Incentive Award | Shares Acquired # | Cash Incentive Payout |
David Trick | 10,138 | $250,000 | 80%/20% | 140.41% | 14,234 | $351,026 |
David Barranco | 4,056 | $100,000 | 50%/50% | 153.5% | 6,225 | $153,500 |
Stephen M. Ksenak | 4,056 | $100,000 | 80%/20% | 140.41% | 5,695 | $140,410 |
The Committee considered the Company's actual performance against each of the LTIP metrics for AAC and Ambac for each of the NEOs (other than Mr.Messrs. LeBlanc, Trick, Barranco, Ksenak and Ms. Smith, who were not employees of Ambac at that time) and determined that the Net Asset Value was projected to Liability Ratiodecrease over the performance period but certain successful favorable achievements by management, such as (i) COFINA restructuring, (ii) Ballantyne Re PLC settlement, (iii) AMPS exchange and (iv) receipt of proceeds from a Citigroup - SEC settlement all contributed to the Net Asset Value increasing during the performance period. Reductions of Watchlist & Adversely Classified Credit net par outstanding at AAC had exceeded target expectationsduring the performance period were positively impacted by active de-risking strategies including credit exposure reductions at a payout percentage of 131.7% for the AAC portion of the 2015 LTIP award. With respect to Ambac, the Company achieved aBallantyne Re PLC, NJ Transportation Trust Fund, COFINA and other risk remediation and reinsurance transactions. Cumulative EBITDA of $16.0 million exceeding target expectations at a payout percentage of 175.3% for the Ambac portion of the 2015 LTIP award. Weighting the AAC performance metric at 80% and Ambac performance metric at 20%, for each of Messrs. Trick and Ksenak, the 2015 LTIP percentage payout on a blended basis was set at 140.41% of the target award. Due to Mr. Barranco's focus on business development at Ambac atduring the dateperformance period benefited from higher investment returns related to holdings of grant, the weighting of his performance metrics were set at 50% each for Ambac and AAC issued securities and the 2015 LTIP percentage payout was therefore higher on a blended basis at 153.50%.
Special Awards followingreceipt of annual expense reimbursements from AAC over the exit of AAC's Segregated Account from Rehabilitation.The exit of the Segregated Account from rehabilitation was a major milestone for the Company. Execution of that transaction allows for more efficient, cost-effective management of AAC, permits a better integration of corporate governance best practices at Ambac and AAC, and has added incremental adjusted book value of approximately $7 per share to Ambac through the settlement at a discount of deferred payment obligations. The exit from rehabilitation required extensive negotiations with multiple parties who had varying interests, required regulatory and court approval, and was successfully completed on February 12, 2018. With respect to both the 2015 LTIP awards (with the three year performance period ending December 31, 2017) and the 2017 annual STIP awards, there were certain performance factors that were impacted by the timing of the Segregated Account's exit from rehabilitation, principally the adjusted book value for the 2017 STIP and the ALR / net asset value for the 2015 LTIP of the Company. While the Segregated Account's exit from rehabilitation concluded before the filing of Ambac’s Annual Report on Form 10-K for the year ended December 31, 2017, under U.S. GAAP accounting rules, the Company was unable to reflect the benefits of the transaction in its audited consolidated financial statements for 2017. As a result, for the executive management team, the Board decided that payouts under the LTIP and STIP programs would be determined in accordance with the year-end U.S. GAAP financial statements. However, following the filing of the quarterly report on Form 10-Q for the three months ended March 31, 2018 (including the quarterly financial statements) with the SEC, the Committee determined that it was appropriate to make an additional off-cycle award for Mr. LeBlanc and other members of the executive team in 2018 after the benefits of the conclusion of the Segregated Account rehabilitation exit transactions were fully reflected in the first quarter 2018 financial statements. The Committee reviewed the benefits conferred upon the Company and the impact that the transaction would have had on the 2017 STIP and 2015 LTIP performance metrics if the transaction were concluded in the fourth quarter of 2017. The Committee concluded that a special incentive award payment should be made to members of the executive management team in the form of restricted stock units reflecting: (i) the extraordinary effort and achievement demonstrated by the executive management team in bringing the Segregated Account rehabilitation to a successful conclusion, and (ii) the differential in payout that would have been made under the 2017 STIP program and 2015 LTIP program, after giving pro forma effect to the impact on the related performance metrics as if the conclusion of the Segregated Account's exit from rehabilitation had occurred in the fourth quarter of 2017.
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The following table reflects the special awards granted to each of our NEOs following the exit of AAC's Segregated Account from rehabilitation.
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Name | Grant Date | Special RSU Awards (#)(1) | Grant Date Fair Value of Special RSU Awards ($)(2) |
Claude LeBlanc | May 16, 2018 | 55,173 |
| 1,056,000 |
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David Trick | May 16, 2018 | 13,062 |
| 250,000 |
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David Barranco | May 16, 2018 | 7,837 |
| 150,000 |
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Stephen M. Ksenak | May 16, 2018 | 10,450 |
| 200,000 |
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R. Sharon Smith | May 16, 2018 | 7,837 |
| 150,000 |
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(1)
| RSUs granted to each of the NEOs listed above will settle and be converted into Ambac common stock as follows: 50% on May 16, 2019, and the remaining 50% on May 16, 2020 (unless settled earlier due to an executive’s departure from the Company). |
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(2)
| As required under SEC rules for compensation disclosure, the value of the RSUs reported in the table above is (i) based on the grant date fair value of awards in the fiscal year actually granted and (ii) computed in accordance with FASB ASC Topic 718. |
Following the grant of these special off-cycle awards to the senior management team, the Committee reset the performance metrics for the 2018 STIP and LTIP programs so that management's performance targets assumed that the 2018 restructuring and the exit of the Segregated Account from rehabilitation was fully accounted for in the prior period.
Perquisites. The Company provided a limited number of perquisites to all our employees, including our executive officers. For Mr. LeBlanc and Ms. Smith, perquisites included reimbursement from Ambac for certain commuting expenses, and for Messrs. Trick and Barranco, perquisites included payments for tax preparation services as a result of their roles as executive directors of Ambac UK. Consistent with past practice, in order to support the long-term wellness and productivity of our executive officers, the Company also provided access to an extensive physical examination for all executive officers, at the Company's expense. Messrs. Barranco and Eisman and Ms. Smith accepted this offering in 2021.
Employment Agreements. Certain of our active NEOs have entered into employment agreements with the Company which provide for certain compensation and benefits, including, severance benefits in certain circumstances. In December 2016, we entered into an employment agreement with our CEO, Claude LeBlanc, in connection with his appointment, which took effect on January 1, 2017. This agreement was subsequently amended on February 27, 2020. We also entered into an employment agreement with Mr. Trick in November of 2016, and Mr. Ksenak in January 2017. While the Compensation Committee considers employment agreements customary for the chief executive officer, the Committee believed it was important to execute an employment agreement with each of Messrs. Trick and Ksenak to retain their services to Ambac for the foreseeable future. (See “Agreement with Claude LeBlanc”, and “Agreements with Other Executive Officers” below). Severance Agreements have been entered into with various executive officers when the Compensation Committee believes it is in the best interest of the Company to secure an orderly separation between such officers and the Company, which typically include certain continuing obligations from the departing executive.
Post-Employment Benefits. Pursuant to Ambac's Severance Pay Plan, to provide protection in the event of an involuntary termination, each of our current executive officers (other than Messrs. LeBlanc, Trick and Ksenak) is entitled to receive a severance payment equal to 52 weeks of such executive officer's weekly base salary at the time of termination of his or her employment by Ambac as the result of (i) a job elimination, job discontinuation, office closing, reduction in force, business restructuring, redundancy, or such other circumstances as the Company deems appropriate for the payment of severance or (ii) a “termination by mutual agreement” (as defined in the Severance Pay Plan). In addition to this severance payment, each of our current NEOs (other than Messrs. LeBlanc, Trick and Ksenak) would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage under the Company's group health plan for the first twelve months following his or her termination of employment. The portion of the premiums to be paid by the Company will be the same as the amount paid by the Company for the same group health insurance coverage for active employees. For a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers."
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The 20182021 LTIP awards consisted of both PSUs and RSUs. The PSU and RSU award agreements for our NEOs each provided that if a termination occurs for any reason prior to June 30, 2018 with respect to the PSUs, or September 2, 2018 with respect to the RSUs, the entire grant of PSUs or RSUs would expire and be forfeited immediately. The PSU award agreements for our NEOs provide that if a termination occurs on or after June 30, 2018prior to the last day of the performance period by reason of death, disability, an involuntary termination other than for “cause,” or retirement, the recipient would be entitled to receive a prorated portionthe number of the PSU awardearned PSUs which would only be payable at the end of the performance period provided that the performance conditions
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Ambac Financial Group, Inc. | 56 | 2022 Proxy Statement |
related to the award were satisfied. The PSU awardIf a termination occurs by reason of death, the recipient would then be pro-ratedentitled to reflectreceive the NEO’s actual service plus twelve (12) months duringnumber of earned PSUs that the Participant would have been entitled to receive had the termination date not occurred prior to the end of the performance period.period at a 100% overall payout multiple regardless of the outcome of the performance goals or rTSR. Comparable provisions arewere included in the 20162019 and 20172020 PSU award agreements, without the benefit of the additional twelve (12) months of credited service.agreements. The 20182021 RSU award agreements for our NEOs generally provide that if a termination occurs, on or after September 2, 2018 other than for “cause,”“cause” or voluntary resignation, the entire grant of RSUs shall vest on the termination date.
Impact of Regulatory Requirements on Compensation
Effective for tax years beginning on January 1, 2018 or later, The Tax Cut and Jobs Act repealed the performance-based compensation and commission exceptions to the Section 162(m) $1 million tax deduction limitation for compensation paid to covered employees. The definition of covered employees was modified to include the Chief Financial Officer as well as the Chief Executive Officer and officers whose total compensation is required to be disclosed to shareholdersstockholders by reason of them being amongst the three highest paid officers. Additionally, any individual who is a covered employee for any taxable year beginning after December 31, 2016 will continue to be a covered employee for all subsequent taxable years, including years after the death of the individual.
Our compensation programs are structured to support organizational goals and priorities and stockholder interests. We do not make compensation determinations based on the income tax treatment of any particular type of award.
Compensation Risk Management
Risks Related to Compensation Policies. In keeping with our risk management framework, we consider risks not only in the abstract, but also risks that might hinder the achievement of a particular objective. We have identified two primary risks relating to compensation: the risk that compensation will be insufficient to retain talent and the risk that compensation strategies might result in unintended incentives. To combat the first risk, as noted above, the compensation of employees throughout the Company is benchmarked against comparative compensation data, permitting us to set compensation levels that we believe contribute to low rates of employee attrition. Further, LTIP awards granted to our NEOs and other senior professionals are subject to vesting over a three-year period. We believe both the levels of compensation and the structure of the LTIP awards have had the effect of retaining key personnel.
With respect to the second risk, ourOur Company-wide year-end compensation program is designed to reflect the performance of the Company, the performance of the business unit in which the employee works and the performance of the individual employee, and is designed to not to encourage excessive risk taking. For example, two of the performance metrics used in our 20182022 Short Term Incentive Plan (Net Asset Value, gross operating run rate expenses(reductions in: Net Par Outstanding in the insured portfolio; and Watch List and Adversely Classified Credits)Gross Operating Run Rate Expense), are designed to encourage the reduction of risk and prudent management of the business. In addition, we pay a significant portion of our year-end incentive compensation in the form of LTIP awards that vest over a three-year period, which makes each of our NEOs and other senior professionals sensitive to long-term risk outcomes, as the value of their awards increase or decrease with the price of our common stock.
Further, performance criteria for the PSUs granted as part of the LTIP awards include reductions in Watch List and Adversely Classified Credits, and an increase in net asset value, all ofa relative Total Shareholder Return modifier, which we believe provide our employees additional incentives to prudently manage the wide range of risks inherent in the Company’s business. We are not aware of any employee behavior motivated by our compensation policies and practices that createcreates increased risks for our stockholders or other constituents.
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The Compensation Committee has performed a review of compensation policies and practices for all of our employees and has concluded that our compensation policies and practices are not reasonably likely to have a material adverse impact on the Company.
Risk Mitigating Policies
Stock Ownership Policy. Effective January 1, 2017, all of our executive officers became subject to our Executive Stock Ownership and Retention Policy. The Chief Executive Officer is required to own Ambac common stock equal in value to at least six times his annual base salary, the Chief Financial Officer is required to own Ambac
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Ambac Financial Group, Inc. | 57 | 2022 Proxy Statement |
common stock equal in value to at least three times his annual base salary and each other executive officer is required to own Ambac common stock equal in value to at least two times their annual base salary.
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Stock Ownership Requirement |
Name | Position with Ambac | Shares Valued at $ |
Claude LeBlanc | President and Chief Executive Officer and Director | $5.4 million |
David Trick | Executive Vice President, Chief Financial Officer and Treasurer | $2.25 million |
David Barranco | Senior Managing Director | $1.0 million |
Stephen M. Ksenak | Senior Managing Director, and General Counsel | $1.2 million |
R. Sharon Smith | Senior Managing Director, and Chief of Staff | $1.0 million |
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Stock Ownership Requirement |
Name | Position with Ambac | Value of required shareholdings | Value of Shares owned at Record Date |
Claude LeBlanc | President and Chief Executive Officer and Director | $5,400,000 | $3,341,808 |
David Trick | Executive Vice President, Chief Financial Officer and Treasurer | $2,250,000 | $1,055,965 |
David Barranco | Senior Managing Director | $1,000,000 | $590,993 |
Stephen M. Ksenak | Senior Managing Director, and General Counsel | $1,200,000 | $767,266 |
R. Sharon Smith | Senior Managing Director, and Chief of Staff | $1,000,000 | $456,915 |
There is no required time period within which these executive officers must attain the applicable stock ownership level under the Stock Ownership Policy and nothing in the Stock Ownership Policy requires executive officers to meet their applicable stock ownership levels through open market purchases of Company common stock. Until a covered executive complies with the Stock Ownership Policy, the covered executive is required to retain 100% of net profit shares (which excludes shares withheld or sold to cover applicable taxes) from any compensatory stock award on exercise, vesting or earn-out. A copy of the Stock Ownership Policy was filed with the SEC as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on December 1, 2016.
Recoupment Policy. Effective January 1, 2017, the Board has adopted a Recoupment Policy. Pursuant to the Recoupment Policy, in the event of a “material financial restatement” or the imposition of a “material financial penalty,” the Company will require, to the fullest extent permitted by applicable law, that a covered employee forfeit and/or reimburse the Company for all or such portion (if any) of the covered employee’s “recoverable compensation” as determined in the sole and absolute discretion of the Board, in accordance with the guidelines set forth in the Recoupment Policy. A “material financial restatement” means the restatement of one or more previously issued financial statements of the Company, for any period ending after December 1, 2016, due to a material error or a series of immaterial errors which could be considered material when viewed in the aggregate of any applicable financial reporting requirements under the securities laws. “Material financial penalty” means a penalty, fine, or other monetary sanction levied against the Company after December 1, 2016, by a regulator or other Federal or state governmental authority in an amount deemed material by the Board of Directors in its sole and absolute discretion. “Recoverable compensation” means certain incentive-based compensation received during a three year look-back period during which (i) the financial reporting measure specified in the applicable award was attained or (ii) the conduct giving rise to the imposition of a material financial penalty against the Company took place. If the grant or earning of an award is based, either wholly or in part, on satisfaction of a financial reporting measure, the award would be deemed received in the fiscal period when that measure was satisfied, in each case without regard to any ongoing service-based vesting requirements. Furthermore, if an award is granted or earned upon satisfaction of financial reporting measures that are based on multiple fiscal years (e.g., a three-year average), the whole award would be deemed Recoverable Compensation for purposes of this Policy if any single fiscal year of the performance period occurs during the three year look-back period. A complete copy of the Recoupment Policy is attachedwas filed with the SEC as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 1, 2016.
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Ambac Financial Group, Inc. |48 | 2019 Proxy Statement
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Prohibition on Pledging and Hedging and Restrictions on Other Transactions involving Common Stock. Our Insider Trading Policy prohibits our executive officers, employees, and Board members from pledging Ambac common stock or using Ambac common stock as collateral for any margin loan. In addition, the Insider Trading Policy contains the following restrictions:
•Executive officers, employees, and Board members are prohibited from engaging in transactions (such as trading in options) designed to hedge against the value of the Ambac common stock, which would eliminate or limit the risks and rewards of the common stock ownership;
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Ambac Financial Group, Inc. | 58 | 2022 Proxy Statement |
•Executive officers, employees, and Board members are prohibited from short-selling Ambac common stock, buying or selling puts and calls on Ambac common stock, or engaging in any other transaction that reflects speculation about the price of Ambac common stock or that might place their financial interests against the financial interests of the Company;
•Executive officers, employees, and Board members are prohibited from entering into securities trading plans pursuant to SEC Rule 10b5-1 without pre-approval; further, no Board member or any NEOexecutive officer may trade in our Common Stock without pre-approval; and
•Executive officers, employees, and Board members may trade in Common Stock only during open window periods, and only after they have pre-cleared transactions.
The Compensation Committee has performed a review of compensation policies and practices for all of our employees and has concluded that our compensation policies and practices are not reasonably likely to have a material adverse impact on the Company. Conclusion
Our compensation program is designed to permit the Company to provide our named executive officersNEOs with total compensation that is competitive, linked to our performance and reinforces the alignment of employee and stockholder interests. At the same time, it is intended to provide us with sufficient flexibility to assure that such compensation is appropriate to attract and retain employees who are vital to the continued success of the Company and to drive outstanding individual and institutional performance. We believe the program met these objectives in 2018.2021.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 20192022 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and disclosure.”
The say on pay vote is advisory, and therefore not binding on Ambac, the Compensation Committee or our Board of Directors. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
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Ambac Financial Group, Inc. |49 | 2019 Proxy Statement
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Compensation Committee Report
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
Alexander D. GreeneC. James Prieur (Chair), Ian D. Haft and C. James PrieurJoan Lamm-Tennant
April 15, 2019
13, 2022
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Ambac Financial Group, Inc. |50 59 | 20192022 Proxy Statement |
20182021 Summary Compensation Table
The table below provides information concerning the compensation of our President and Chief Executive Officer, Chief Financial Officer, and our three most highly compensated executive officers who were executive officers as of December 31, 2018.2021.
| | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($) | Stock Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) (2) | All Other Compensation ($) (3) | Total ($) |
Claude LeBlanc | 2021 | 900,000 | | 4,358,942 | | 1,699,000 | | 21,373 | | 6,979,315 | |
President and Chief Executive Officer | 2020 | 900,000 | | 3,285,787 | | 1,795,500 | | 30,214 | | 6,011,501 | |
2019 | 900,000 | | 3,005,464 | | 1,657,000 | | 25,772 | | 5,588,236 | |
David Trick | 2021 | 750,000 | | 1,054,141 | | 659,000 | | 13,898 | | 2,477,039 | |
Executive Vice President, Chief Financial Officer and Treasurer | 2020 | 750,000 | | 866,025 | | 698,000 | | 13,648 | | 2,327,673 | |
2019 | 750,000 | | 604,652 | | 813,988 | | 19,975 | | 2,188,615 | |
David Barranco | 2021 | 500,000 | | 968,662 | | 688,000 | | 20,723 | | 2,177,385 | |
Senior Managing Director | 2020 | 500,000 | | 764,144 | | 688,000 | | 13,423 | | 1,965,567 | |
2019 | 500,000 | | 550,154 | | 567,992 | | 19,925 | | 1,638,071 | |
Stephen M. Ksenak | 2021 | 600,000 | | 854,696 | | 596,000 | | 12,723 | | 2,063,419 | |
Senior Managing Director and General Counsel | 2020 | 600,000 | | 662,263 | | 610,000 | | 12,523 | | 1,884,786 | |
2019 | 600,000 | | 486,985 | | 635,589 | | 19,050 | | 1,741,624 | |
R. Sharon Smith | 2021 | 500,000 | | 911,689 | | 612,000 | | 19,623 | | 2,043,312 | |
Senior Managing Director and Chief of Staff | 2020 | 500,000 | | 611,323 | | 650,000 | | 17,383 | | 1,778,706 | |
2019 | 500,000 | | 466,734 | | 350,000 | | 36,510 | | 1,353,244 | |
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Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) |
Claude LeBlanc | 2018 | 900,000 | 4,117,020 |
| 1,170,000 |
| 15,987 |
| 6,203,007 |
|
President and Chief Executive Officer | 2017 | 900,000 | — |
| 1,081,000 |
| 5,898 |
| 1,986,898 |
|
| | | | |
|
|
David Trick | 2018 | 750,000 | 791,762 |
| 784,526 |
| 12,750 |
| 2,339,038 |
|
Executive Vice President, Chief Financial Officer and Treasurer | 2017 | 750,000 | 420,017 |
| 573,088 |
| 12,849 |
| 1,755,954 |
|
2016 | 770,192(4) | 312,504 |
| 450,000 |
| 13,808 |
| 1,546,504 |
|
David Barranco | 2018 | 500,000 | 536,004 |
| 423,500 |
| 12,800 |
| 1,472,304 |
|
Senior Managing Director | 2017 | 500,000 | 242,522 |
| 313,440 |
| 11,175 |
| 1,067,137 |
|
2016 | 425,000 | 65,626 |
| 187,500 |
| 12,133 |
| 690,259 |
|
Stephen M. Ksenak | 2018 | 600,000 | 628,021 |
| 438,910 |
| 11,950 |
| 1,678,881 |
|
Senior Managing Director and General Counsel | 2017 | 600,000 | 325,023 |
| 397,703 |
| 11,550 |
| 1,334,276 |
|
2016 | 525,000 | 301,260 |
| 300,000 |
| 11,308 |
| 1,137,568 |
|
R. Sharon Smith | 2018 | 450,000 | 700,504 |
| 237,750 |
| 28,305 |
| 1,416,559 |
|
Senior Managing Director and Chief of Staff | 2017 | 273,460 | — |
| 226,500 |
| 10,306 |
| 510,266 |
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(1)In 2020 and 2021, each of our NEOs received received performance stock units (“PSUs”) and restricted stock units ("RSUs") pursuant to Ambac’s Long Term Incentive Plan (the "LTIP"). In 2019, each of our NEOs received deferred stock units ("DSUs") pursuant to the Short Term Incentive Plan (the "STIP") and received PSUs and RSUs pursuant to the LTIP. The LTIP and STIP are sub-plans of the 2013 Incentive Compensation Plan and its successor, the 2020 Incentive Compensation Plan. As required by Item 402(c)(2) of Regulation S-K, the value of the PSUs, RSUs and DSUs reported in the Summary Compensation Table is based on the grant date fair value of awards in the fiscal year actually granted and computed in accordance with FASB ASC Topic 718 based on the probable outcome of performance conditions being achieved, including the value of the rTSR multiplier, if any, without regard to estimated forfeitures. For a discussion of the assumptions made in the valuation, see Note 2, Basis of Presentation and Significant Accounting Policies, to Ambac’s consolidated financial statements for the year-ended December 31, 2021. The value of PSUs awarded in 2021 to each of our NEOs, assuming the maximum payout level of 220% and a share price of $16.19. would have been as follows: for Mr. LeBlanc, $5,049,030; for Mr. Trick, $1,221,021; for Mr. Barranco, $1,122,038; for Mr. Ksenak, $990,002; and for Ms. Smith, $1,056,038. The value of PSUs awarded in 2020 to each of our NEOs, assuming the maximum payout level of 220% and a share price of $19.50 would have been as follows: for Mr. LeBlanc, $5,321,273; for Mr. Trick, $1,402,530; for Mr. Barranco, $1,237,536; for Mr. Ksenak, $1,072,543; and for Ms. Smith, $990,046. The value of PSUs awarded in 2019 to each of our NEOs, assuming the maximum payout level of 220% and a share price of $20.11 would have been as follows: for Mr. LeBlanc, $3,979,789; for Mr. Trick, $700,174; for Mr. Barranco, $700,174; for Mr. Ksenak, $589,613; and for Ms. Smith, $589,613. Each of our NEOs received RSUs on March 8, 2021 as part of their 2021 LTIP award grant. These RSUs vested in three equal annual installments on March 8th, 2022, 2023, and 2024. Each of our NEOs received RSUs on March 4, 2020 as part of their 2020 LTIP award grant. These RSUs vest in three equal annual installments on January 2nd, 2021, 2022, and 2023. Each of our NEOs received RSUs on March 4, 2019 as part of their 2019 LTIP award grant. These RSUs vest in three equal annual installments on January 2nd, 2020, 2021, and 2022. Each of our NEOs received DSUs in 2019 as part of their STIP award grant as follows: for Mr. LeBlanc, 19,394 DSUs valued at $390,000; for Mr. Trick, 7,186 DSUs valued at $144,500; for Mr. Barranco, 4,476 DSUs valued at $90,000; for Mr. Ksenak, 4,948 DSUs valued at $99,500; and for Ms. Smith, 3,941 DSUs valued at $79,250. DSUs represent vested common stock units of Ambac with a deferred settlement provision. These DSUs settled and converted into Ambac common stock over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date. | |
(1)(2)The amount included in the "Non-Equity Incentive Plan Compensation " column above includes cash incentive award payments pursuant to the Company's year-end 2021, 2020 and 2019 STIP program and cash incentive award payments pursuant to the settlement of 2016 LTIP awards, in each case, as approved by the Compensation Committee following the conclusion of the relevant performance period for each award. | In 2018, each of our NEOs received deferred stock units (DSUs") pursuant to the Short Term Incentive Plan (the "STIP") and performance stock units (“PSUs”) and restricted stock units ("RSUs") pursuant to Ambac’s Long Term Incentive Plan (the "LTIP"), which are sub-plans of the 2013 Incentive Compensation Plan. In addition, in May of 2018, in recognition of the executive management team's efforts to successfully execute a holistic restructuring transaction, including the exit of the Segregated Account of AAC from rehabilitation, a special off-cycle RSU award was granted to each of our NEOs. In 2017, each of our NEOs received DSUs granted pursuant to the STIP, and Messrs. Trick, Barranco, and Ksenak also received PSUs granted in 2017 and 2016 pursuant to the LTIP. As required by Item 402(c)(2) of Regulation S-K, the value of the DSUs, PSUs and RSUs reported in the Summary Compensation Table is (i) based on the grant date fair value of awards in the fiscal year actually granted and (ii) computed in accordance with FASB ASC Topic 718 based on the probable outcome of performance conditions being achieved, if any, without regard to estimated forfeitures. For a discussion of the assumptions made in the valuation see footnote 2, Basis of Presentation and Significant Accounting Policies, to Ambac’s consolidated financial statements for the year-ended December 31, 2018. Each of our NEOs received DSUs in 2018 as part of their STIP award grant as follows: for Mr. LeBlanc, 23,924 DSUs valued at $361,000; for Mr. Trick, 9,394 DSUs valued at $141,750; for Mr. Barranco, 5,700 DSUs valued at $86,000; for Mr. Ksenak, 6,826 DSUs valued at $103,000; and for Ms. Smith, 16,602 DSUs valued at $250,500; and in 2017 DSUs were issued as part of the STIP in the following amounts: for Mr. Trick, 6,712 DSUs valued at $150,000; for Mr. Barranco, 2,797 DSUs valued at $62,500; and for Mr. Ksenak, 4,475 DSUs valued at $100,000. DSUs represent vested common stock units of Ambac with a deferred settlement provision. These DSUs will settle and convert into Ambac common stock annually over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date (unless settled earlier due to an executive’s departure from the Company). The value of the PSUs listed in the table above is based on a grant date fair value and computed in accordance with FASB ASC Topic 718 based on the probable outcome of performance conditions being achieved. The value of PSUs awarded in 2018 to each of our NEOs, assuming the maximum payout level would have been as follows: for Mr. LeBlanc, $3,600,000; for Mr. Trick, $533,340; for Mr. Barranco, $400,006; for Mr. Ksenak, $433,324; and for Ms. Smith, $400,006. The value of PSUs awarded in 2017 to Messrs. Trick, Barranco and Ksenak assuming the maximum payout level would have been as follows: for Mr. Trick, $600,008; for Mr. Barranco, $400,020; and for Mr. Ksenak, $500,014. The value of the PSUs awarded in 2016 to Messrs. Trick, Barranco, and Ksenak assuming the maximum payout level would have been as follows: for Mr. Trick, $249,996; for Mr. Barranco, $175,004; and for Mr. Ksenak, $225,009. Each of our NEOs received RSUs on March 2, 2018 as part of their 2018 LTIP award grant. These RSUs vest in three equal annual installments on March 2nd, 2019, 2020, and 2021. Each of Messrs. Trick and Ksenak also received a one-time grant of 12,887 RSUs on February 22, 2016 under the 2013 Incentive Compensation Plan that vested in three equal annual installments on February 21, 2017, 2018 and 2019.
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Ambac Financial Group, Inc. |51 60 | 20192022 Proxy Statement |
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(3)"All Other Compensation” for each of our named executive officers in 2021 includes, among other things, contributions by Ambac to the AAC Savings Incentive Plan, as well as a portion of the life insurance premiums paid. In addition for Mr. LeBlanc and Ms. Smith, the amount reported also includes reimbursement from Ambac for certain commuting expenses, and for Mr. Barranco and Ms. Smith, the amount reported includes reimbursement from Ambac for the cost of an executive physical. For Messrs. Trick and Barranco, the amount reported includes reimbursement from Ambac for payments for tax preparation services received as a result of services rendered to Ambac UK. (2)
| The amount included in the "Non-Equity Incentive Plan Compensation " column above includes cash incentive award payments pursuant to the Company's year-end 2018, 2017 and 2016 STIP program and cash incentive award payments pursuant to the settlement of 2014 and 2015 LTIP awards, in each case, as approved by the Compensation Committee following the conclusion of the relevant performance period for each award. |
| |
(3)
| All Other Compensation” for each of our named executive officers in 2018 includes, among other things, contributions by Ambac to the AAC Savings Incentive Plan, as well as a portion of the life insurance premiums paid. In addition for Mr. LeBlanc and Ms. Smith, the amount reported also includes reimbursement from Ambac for certain commuting expenses, and for Messrs. Trick and Barranco, includes payments for tax preparation services received as a result of services rendered to Ambac Assurance UK Limited ("Ambac UK"). |
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(4)
| In 2016, Mr. Trick received supplemental payments of $15,000 per month, which were included as part of his salary, for his service as interim President and Chief Executive officer of AAC until the appointment of Nader Tavakoli as President and Chief Executive officer of AAC in March 2016. |
Grants of Plan-Based Awards in 20182021
The following table contains information on the grants of plan-based awards made to each of our named executive officers in 20182021 with respect to our STIP and LTIP programs which are administered pursuant to Ambac’s 20132020 Incentive Compensation Plan. In 2018,2021, Ambac's LTIP awards granted to our NEOs were denominated 67%60% in PSUs and 33%40% in RSUs. Similarly, Ambac'sRSUs and STIP awards granted to our NEOs in 2018 were denominated 75% in incentive100% as cash awards and 25% in DSUs.inventive cash awards. The terms and conditions of these awards are described in the footnotes and narrative following this table.
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| Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards | Grant Date Fair Value of Stock Unit Awards ($) (4) |
| | | | | PSU Awards (2) | | | RSU Awards (2) |
Name and Principal Position | Grant Date | Threshold(3) ($) | Target ($) | Maximum ($) | | | Threshold(3) (#) | Target (#) | Maximum (#) | | | # |
Claude LeBlanc | | $ | 562,500 | | $1,125,000 | $2,250,000 | | | — | | — | | — | | | | — | | — | |
| March 8, 2021 | — | | — | | — | | | | 70,878 | | 141,755 | | 283,508 | | | | — | | $2,646,566 |
| March 8, 2021 | — | | — | | — | | | | — | | — | | — | | | | 94,502 | | 1,712,376 | |
David Trick | | $ | 212,500 | | $425,000 | $850,000 | | | — | | — | | — | | | | — | | — | |
| March 8, 2021 | — | | — | | — | | | | 17,141 | | 34,281 | | 68,560 | | | | — | | $640,026 |
| March 8, 2021 | — | | — | | — | | | | — | | — | | — | | | | 22,854 | | 414,114 | |
David Barranco | | $ | 212,500 | | $425,000 | $850,000 | | | — | | — | | — | | | | — | | — | |
March 8, 2021 | — | | — | | — | | | | 15,751 | | 31,502 | | 63,002 | | | | — | | $588,142 |
| March 8, 2021 | — | | — | | — | | | | — | | — | | — | | | | 21,000 | | 380,520 | |
Stephen M. Ksenak
| | $ | 200,000 | | $400,000 | $800,000 | | | — | | — | | — | | | | — | | — | |
March 8, 2021 | — | | — | | — | | | | 13,898 | | 27,795 | | 55,590 | | | | — | | $518,933 |
| March 8, 2021 | — | | — | | — | | | | — | | — | | — | | | | 18,530 | | 335,764 | |
R. Sharon Smith | | $ | 200,000 | | $400,000 | $800,000 | | | — | | — | | — | | | | — | | — | |
March 8, 2021 | — | | — | | — | | | | 14,825 | | 29,649 | | 59,298 | | | | — | | $553,547 |
| March 8, 2021 | — | | — | | — | | | | — | | — | | — | | | | 19,765 | | 358,142 | |
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| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | Grant Date Fair Value of Stock Unit Awards ($) (4) |
| | PSU Awards(2) | RSU Awards # (2) | DSU Awards # (3) |
Name and Principal Position | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
Claude LeBlanc | | $450,000 | $900,000 | $1,800,000 | — |
| — |
| — |
| — |
| — |
| — |
|
March 2, 2018 | — |
| — |
| — |
| 59,642 |
| 119,284 |
| 238,568 |
| | — |
| $1,799,996 |
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 59,643 |
| — |
| 900,013 |
|
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| | 23,924 |
| 361,000 |
|
| May 16, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 55,173 |
| — |
| 1,056,011 |
|
David Trick | | $206,250 | $412,500 | $618,750 | — |
| — |
| — |
| — |
| — |
| — |
|
| March 2, 2018 | — |
| — |
| — |
| 8,836 |
| 17,672 |
| 35,344 |
| — |
| — |
| $266,670 |
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 8,836 |
| — |
| 133,335 |
|
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 9,394 |
| 141,750 |
|
| May 16, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 13,062 |
| — |
| 250,007 |
|
David Barranco | | $125,000 | $250,000 | $375,000 | — |
| — |
| — |
| — |
| — |
| — |
|
March 2, 2018 | — |
| — |
| — |
| 6,627 |
| 13,254 |
| 26,508 |
| — |
| — |
| $200,003 |
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 6,627 |
| — |
| 100,001 |
|
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 5,700 |
| 86,000 |
|
| May 16, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 7,837 |
| — |
| 150,000 |
|
Stephen M. Ksenak
| | $150,000 | $300,000 | $450,000 | — |
| — |
| — |
| — |
| — |
| — |
|
March 2, 2018 | — |
| — |
| — |
| 7,179 |
| 14,358 |
| 28,716 |
| — |
| — |
| $216,662 |
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 7,180 |
| — |
| 108,346 |
|
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 6,826 |
| 103,000 |
|
| May 16, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 10,450 |
| — |
| 200,013 |
|
R. Sharon Smith | | $112,500 | $225,000 | $337,500 | — |
| — |
| — |
| — |
| — |
| — |
|
March 2, 2018 | — |
| — |
| — |
| 6,627 |
| 13,254 |
| 26,508 |
| — |
| — |
| $200,003 |
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 6,627 |
| — |
| 100,001 |
|
| March 2, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 16,602 |
| 250,500 |
|
| May 16, 2018 | — |
| — |
| — |
| — |
| — |
| — |
| 7,837 |
| — |
| 150,000 |
|
(1) STIP target annual incentives are set as a percentage of base salary for each of our NEOs as follows: 125% for the Chief Executive Officer; and between 55% and 85% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for each of the NEOs based on the Compensation Committee’s review of overall corporate performance and individual and business unit achievement relative to the pre-established goals and objectives.
(2) Each of our NEOs received PSUs and RSUs on March 8, 2021 pursuant to Ambac’s LTIP. The RSUs granted as part of the 2021 LTIP award will vest in three equal annual installments on each of March 8, 2022, March 8, 2023, and March 8, 2024. For the PSUs the number of shares of Ambac’s common stock that may be acquired can range from 0% to 200% of the target award (not including any adjustment that may be applied pursuant to the rTSR modifier).
(3) Threshold amounts represent a proportionate payout assuming actual performance measures equal the mid-point between minimum performance and target level performance.
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Ambac Financial Group, Inc. |52 | 2019 Proxy Statement(4) As required under SEC rules for compensation disclosure, the value of the PSUs and RSUs reported in the table above is based on the grant date fair value of awards and computed in accordance with FASB ASC Topic 718.
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(1)
| STIP target annual incentives are set as a percentage of base salary for each of our NEOs as follows: 100% for the Chief Executive Officer; 55% for the Chief Financial Officer; and 50% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for the Chief Executive Officer, and from 0% to 150% of target for the other NEOs based on the Compensation Committee’s review of overall corporate performance and individual and business unit achievement relative to the pre-established goals and objectives. |
| |
(2)
| Each of our NEOs received PSUs and RSUs on March 2, 2018 pursuant to Ambac’s LTIP. The RSUs granted as part of the 2018 LTIP award will vest in three equal annual installments on each of March 2, 2019, March 2, 2020, and March 2, 2021.On May 16, 2018, in recognition of the executive management team's efforts to bring about the successful exit of the Segregated Account of AAC from Rehabilitation, a special off-cycle RSU award was granted to each of our NEOs. The RSUs granted on May 16, 2018, will vest and settle in two equal annual installments on each of May 16, 2019, and May 16, 2020. |
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(3)
| DSUs were granted to each of the NEOs listed above and constituted 25% of their 2017 STIP award. Of these DSUs, 50% settled and converted into Ambac common stock on March 2, 2019, and the remaining 50% will settle and convert into Ambac common stock on March 2, 2020 (unless settled earlier due to an executive’s departure from the Company). |
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(4)
| As required under SEC rules for compensation disclosure, the value of the PSUs, RSUs and DSUs reported in the table above is (i) based on the grant date fair value of awards in the fiscal year actually granted and (ii) computed in accordance with FASB ASC Topic 718. |
STIP Awards
STIP awards included in the table above are denominated 75% in incentive cash awards and 25% in vested common stock units of Ambac with a deferred settlement provision (“DSUs”). STIP awards are annual incentives awards denominated in cash and meant to reward performance. The DSUs granted as part of the year-end 2018 STIP Awards will settle and convert into Ambac common stock annually over a two-year period; 50% in March 2020 and the remaining 50% in March 2021, unless settled earlier due to an employee’s departure from the Company. For a more detailed description of our STIP program, see "Pay Mix -- Short Term Incentive Compensation" in the "Compensation Discussion and Analysis" section of this Proxy Statement.
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LTIP Awards
The PSUs and RSUs included in the table above and awarded on March 2, 20188, 2021 were granted pursuant to the LTIP and represent a promise to deliver, within 75 days after the end of the performance period, a number of shares of Ambac’s common stock. The RSUs will vest on a one for one basis in three equal annual installments on each of March 2, 2019,8, 2022, March 2, 2020,8, 2023, and March 2, 2021.8, 2024. For the PSUs the number of shares of Ambac’s common stock that may be acquired can range from 0% to 200% of the target award (not including any adjustment that may be applied pursuant to the rTSR modifier), depending on the achievement by either Ambac or its principal operating subsidiary, AAC, of a three-yearcertain financial performance objectiveobjectives at AAC and Xchange Group as determined by the Compensation Committee. While the payout of PSUs granted pursuant to the 2021 LTIP awards will not settle for a three year period and be subject to the rTSR modifier, the measurement period for determining the achievement of goals against the pre-set metrics was set at two years to create a better alignment between Company performance and management compensation. For 2022 LTIP awards, the measurement period for determining the achievement of goals against the pre-set metrics was set at three years. For a more detailed description of our LTIP program, see "Pay Mix -- Long Term Incentive Compensation" in the "Compensation Discussion and Analysis" section of this Proxy Statement.
Special Off-Cycle Award
The Committee concluded that a special off-cycle award should be made to members of the executive management team in the form of restricted stock units reflecting: (i) the extraordinary effort and achievement demonstrated by the executive management team in successfully executing a holistic restructuring transaction, including the exit of the Segregated Account of AAC from rehabilitation, and (ii) the differential in payout that would have been made under the 2017 STIP program and 2015 LTIP program, after giving pro forma effect to the the impact on the related performance metrics as if the conclusion of the Segregated Account rehabilitation had occurred in the fourth quarter of 2017. See "Special Awards following the exit of AAC's Segregated Account from Rehabilitation" in the "Compensation Discussion and Analysis" section of this Proxy Statement.
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Agreement with Claude LeBlanc
The Boards of Directors of Ambac and AAC appointed Claude LeBlanc President and Chief Executive Officer as of January 1, 2017. At that time Ambac and AAC have entered into an employment agreement with Mr. LeBlanc. In February, 2020, the Compensation Committee of the Ambac Board approved certain amendments to the employment agreement (the “Amended and Restated LeBlanc Employment Agreement”) to remove certain clauses that set maximums, as a percentage of base salary, on annual bonus amounts and long-term incentive award amounts. The Amended and Restated LeBlanc Employment Agreement with Mr. LeBlanc (the “LeBlanc Employment Agreement”). The agreement had an initialprovides for a term of one (1) year, and will automatically renew for successive one (1) year terms unless either party notifies the other that it does not wish to renew the agreement at least 90 days before the end of the then-current term (the initial one year period of employment under the Amended and Restated LeBlanc Employment Agreement and any successor period is known as the “employment period”). Under the Amended and Restated LeBlanc Employment Agreement, Mr. LeBlanc is entitled to an annual base salary of no less than $900,000 and, for each calendar year that ends during the employment period, starting with the 2017 calendar year, he shall be eligible to receive an annual bonus pursuant to the Company’s annual bonus plan for senior executives, a portion of which, not to exceed 50%, may be awarded in the form of equity grants as determined in the discretion of the Compensation Committee of the Board of Directors of Ambac (the “Compensation Committee”). The amount of any such annual bonus paid to Mr. LeBlanc during the employment period shall be based on the achievement of pre-established performance goals that are establishedapproved by the Compensation Committee. Mr. LeBlanc’s target annual incentive award amount shall be no less than 100% of base salary and his maximum annual incentive award shall be 200% of base salary, as determined by the Compensation Committee, in its discretion. In addition, Mr. LeBlanc is eligible to participate in Ambac’s incentive compensation plan, or any successor or additional plan, subject to the terms of such plan, as determined by the Compensation Committee, in its discretion. With respect to each calendar year that ends during the employment period, starting with the 2017 calendar year, Mr. LeBlanc’s target annual LTIP award amount shall be no less than 150% of base salary and Mr. LeBlanc’s maximum annual LTIP award amount shall be 300% of base salary, as determined by the Compensation Committee in its discretion.
During the employment period, Mr. LeBlanc shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company, as in effect from time to time, that are generally made available to senior executives of the Company. Any compensation paid to Mr. LeBlanc pursuant to the Amended and Restated LeBlanc Employment Agreement or any other agreement or arrangement with the Company shall be subject to mandatory repayment by Mr. LeBlanc to the Company to the extent any such compensation paid to Mr. LeBlanc is, or in the future becomes, subject to (i) the Company’s Recoupment Policy as in effect from time to time, or (ii) any Federal or state law, rule or regulation which imposes mandatory recoupment. Mr. LeBlanc shall be required to hold shares of the Company’s common stock as set forth in, and subject to the terms of, Ambac’s Stock Ownership Policy as in effect from time to time. The Stock Ownership Policy generally requires that Mr. LeBlanc hold shares of the Company’s common stock equal in value to six times his base salary.
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If Mr. LeBlanc’s employment is terminated due to death or disability, he would receive (i) his base salary and any accrued benefits (as defined in the Amended and Restated LeBlanc Employment Agreement) through the date of termination, and (ii) an annual bonus for the year of termination, based on actual full-year performance (with any individual factor being rated at 100%), pro-rated to reflect the time of service for such year through the date of termination.
If Mr. LeBlanc’s employment is terminated by the Company for “cause” (as defined in the Amended and Restated LeBlanc Employment Agreement), or if he resigns without “good reason” (as defined in the Amended and Restated LeBlanc Employment Agreement), or his employment is terminated due to the non-renewal of the Amended and Restated LeBlanc Employment Agreement by Mr. LeBlanc, he would receive his base salary and any accrued benefits through the date of termination; provided that his accrued benefits shall not include any earned but unpaid annual incentive award for the year preceding the year of termination unless otherwise determined by the Compensation Committee.
If Mr. LeBlanc’s employment is terminated by the Company other than for “cause” or if he resigns for “good reason,” or his employment is terminated due to the non-renewal of the Amended and Restated LeBlanc Employment Agreement by the Company, Mr. LeBlanc would be entitled to (i) receive his base salary and any accrued benefits through the date of termination, (ii) receive a lump sum payment equal to two (2) times the sum of (a) one year’s base salary and (b) the amount of the annual target incentive award for the calendar year in which the date of termination occurs (“Target Bonus”), and
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(iii) receive a lump sum payment equal to the Target Bonus pro-rated to reflect the time of service for such year through the date of termination, and (iv) for up to twelve (12) months following the date of termination, receive customary outplacement services provided to senior executives of the Company. To the extent that Mr. LeBlanc properly elects to continue health care coverage under COBRA, he and his eligible dependents would also continue to participate in the Company’s basic medical and life insurance programs for twelve months (subject to earlier discontinuation in certain circumstances). Furthermore, unless a particular award agreement provides Mr. LeBlanc with greater vesting rights (as is the case with the 2020, 2021 and 2022 PSU award agreements), Mr. LeBlanc shall receive twelve (12) months of vesting acceleration on all of his then-outstanding time-based equity awards or, if vesting is less frequent than annually, a pro rata portion in an amount determined by multiplying the total number of shares or units covered by the applicable award by a fraction where the numerator is the number of days that have elapsed from the most recent vesting date (or, if none, the grant date) and the denominator is the total number of days covered by the vesting schedule starting from the grant date and ending on the final scheduled vesting date, and, with respect to Mr. LeBlanc’s then-outstanding performance-based equity awards, Mr. LeBlanc shall be deemed to have satisfied the service-based component of such awards and shall be eligible to receive a portion of each such award based on actual performance through the end of the applicable performance period, pro-rated to reflect his actual service plus twelve (12) months during each performance period. If Mr. LeBlanc's employment is terminated by the Company other than for “cause” or if he resigns for “good reason,” in either case in contemplation of and no more than 120 days prior to, or within twelve (12) months following, a change in control (as defined in the Amended and Restated LeBlanc Employment Agreement), he would be entitled to receive the same compensation described above in this paragraph; provided, that with respect to all of Mr. LeBlanc’s outstanding equity awards, (x) all of the time-based equity awards shall become immediately vested and (y) with respect to the performance-based equity awards, Mr. LeBlanc shall be eligible to vest in each such award based on actual performance through the end of the applicable performance period.
Severance payments made to Mr. LeBlanc in connection with his termination of employment are subject to his delivery of a general release of claims and his material compliance with the restrictive covenants set forth in the Amended and Restated LeBlanc Employment Agreement. The Amended and Restated LeBlanc Employment Agreement contains restrictive covenants relating to the non-disclosure of confidential information, non-competition (which runs for 12 months following Mr. LeBlanc’s termination of employment), non-solicitation (or hiring) of employees (which runs for 12 months following Mr. LeBlanc’s termination of employment), mutual
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non-disparagement, and cooperation on certain matters (which runs for 60 months following Mr. LeBlanc’s termination of employment).
The preceding summary of the Amended and Restated LeBlanc Employment Agreement contained in this Proxy Statement is qualified in its entirety by reference to the full text of the Amended and Restated LeBlanc Employment Agreement dated as of February 27, 2020 by and among Ambac, AAC and Claude LeBlanc, which is filed as Exhibit 10.110.46 to Ambac’s CurrentAmbac's Annual Report on Form 8-K dated10-K for the year ended December 13, 2016,31, 2019, as though it were fully set forth herein.
Agreements with Other Executive Officers
David Trick
On November 1, 2016 (the “effective date”), Ambac and its principal subsidiary, AAC, entered into an Employment Agreement (the “Trick Employment Agreement”) with David Trick, pursuant to which Mr. Trick will continue to serve as Chief Financial Officer and Treasurer of both companies, and was given the additional title of Executive Vice President. The Trick Employment Agreement has an initial term of one (1) year and will automatically renew for successive one (1) year terms unless either party notifies the other that it does not wish to renew the Agreement at least 120 days before the end of the then-current term (the initial one year period of employment under the Agreement and any successor period is known as the “employment period”).
Under the Trick Employment Agreement, Mr. Trick is entitled to an annual base salary of no less than $750,000, commencing as of March 7, 2016, and is eligible for an annual incentive award pursuant to the Company’s annual incentive award plan for senior executives. A portion of Mr. Trick’s annual incentive award may be awarded in the form of vested equity grants with deferred settlement (not to exceed 40% of his annual incentive award amount for any calendar year), as determined in the discretion of the Compensation Committee. The amount of any
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annual incentive award paid to Mr. Trick during the employment period shall be based on the achievement of pre-established performance goals that are establishedapproved by the Compensation Committee. Mr. Trick’s target annual incentive award shall be set at no less than 55% of base salary.
Stephen M. Ksenak
On January 4, 2017 (the “effective date”), Ambac and its principal subsidiary, AAC, entered into an Employment Agreement (the “Ksenak Employment Agreement”) with Stephen M. Ksenak, pursuant to which Mr. Ksenak will continue to serve as Senior Managing Director and General Counsel of both companies. The Ksenak Employment Agreement has an initial term of one (1) year and will automatically renew for successive one (1) year terms unless either party notifies the other that it does not wish to renew the Agreement at least 90 days before the end of the then-current term (the initial one year period of employment under the Ksenak Employment Agreement and any successor period is known as his “employment period”).
Under the Ksenak Employment Agreement, Mr. Ksenak is entitled to an annual base salary of no less than $600,000, commencing as of January 1, 2017, and is eligible for an annual incentive award pursuant to the Company’s annual incentive award plan for senior executives. A portion of Mr. Ksenak’s annual incentive award may be awarded in the form of vested equity grants with deferred settlement (not to exceed 25% of his annual incentive award amount for any calendar year), as determined in the discretion of the Compensation Committee. The amount of any annual annual incentive award paid to Mr. Ksenak during his employment period shall be based on the achievement of pre-established performance goals that are establishedapproved by the Compensation Committee. Mr. Ksenak’s target annual incentive award shall be set at no less than 50% of base salary.
Terms and Conditions of the Trick and Ksenak Employment Agreements
Each of the Trick Employment Agreement and the Ksenak Employment Agreement provides that during the employment period, Messrs. Trick and Ksenak will be eligible to participate in Ambac’s incentive compensation plan, or any successor or additional plan, subject to the terms of any such plan, as determined in the discretion the
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Compensation Committee. Equity awards granted to Messrs. Trick and Ksenak under Ambac’s incentive compensation plan shall be similar in form and shall have similar terms and conditions (other than amount) as equity awards granted to other senior executives of the Company. With respect to each calendar year that ends during the respective employment periods, the target annual long-term incentive award amounts for each of Mr. Trick and Mr. Ksenak shall be no less than $250,000, and $225,000, respectively, each as determined by the Compensation Committee in its discretion.
If the Company terminates employment of either Mr. Trick or Mr. Ksenak other than for “Cause” (including notice of non-renewal by the Company) or Mr. Trick or Mr. Ksenak terminates his own employment with “Good Reason” (as each such term is defined in the respective employment agreement), the Company will pay to such executive his base salary due through the date of termination, any unpaid annual incentive award earned with respect to any fiscal year ending on or preceding the date of termination and any other accrued benefits to which he is entitled as of the date of termination. In addition, such executive will be entitled to receive the following severance payments and benefits: (a) a lump sum payment equal to 1.5 times the sum of (i) base salary and (ii) the amount of target annual incentive award, (b) a lump sum payment equal to target annual incentive award for the year in which the termination occurs pro-rated to reflect the time of service for such year through the date of termination, and (c) such executive and his eligible dependents will be entitled to continue to participate in such basic medical and life insurance programs of the Company as are in effect from time to time, on the same terms and conditions as applicable to active senior executives of the Company, for twelve months or, if earlier, until the date said executive becomes eligible to receive coverage from another employer or is otherwise no longer eligible to receive COBRA continuation coverage. With respect to all of the outstanding equity awards granted to such executive on and after the effective date of his employment agreement, unless a particular award agreement provides for greater vesting rights (as is the case with the 2020, 2021 and 2022 PSU award agreements), (i) such executive will receive 12 months of vesting acceleration on his then-outstanding awards or, if vesting is less frequent than annually, a pro rata portion, with the period from the last vesting date (or, if none, the grant date) as the numerator and the period
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from such last vesting date (or grant date) to the next vesting date as the denominator, and (ii) with respect to such executive's then-outstanding performance-based equity awards, such executive will be deemed to have satisfied the service-based component of such awards and will be eligible to receive a portion of each such award based on actual performance through the end of the applicable performance period, pro-rated to reflect his actual service plus 12 months during each performance period.
If the Company terminates either Mr. Trick's or Mr. Ksenak's employment other than for Cause (including notice of non-renewal by the Company) or either Mr. Trick or Mr. Ksenak terminates his employment for Good Reason, in each case in contemplation of and no more than 90 days prior to, or one year following the occurrence of, a “Change in Control” (as defined in the respective employment agreements), then, the multiplier used to determine the severance payments that such executive would otherwise be entitled to receive, as described in clause (a) of the immediately preceding paragraph, shall be 2.0 instead of 1.5, and (i) all of such executive’s then-outstanding time-based equity awards granted on or after the effective date of his employment agreement will become immediately vested and (ii) with respect to his then-outstanding performance-based equity awards granted on or after the effective date of his employment agreement, such executive will be eligible to vest in each such award based on actual performance through the end of the applicable performance period.
Severance payments made to each of Messrs. Trick and Ksenak in connection with their termination of employment are subject to their delivery of a general release of claims and material compliance with the restrictive covenants set forth in their respective employment agreements. Each of the Trick Employment Agreement and the Ksenak Employment Agreement contains restrictive covenants relating to the non-disclosure of confidential information, non-competition (which runs for 12 months following each executive’s termination of employment), non-solicitation (or hiring) of employees (which runs for 12 months following each executive’s termination of employment), mutual non-disparagement (which runs for three years following each executive’s termination of employment), and cooperation on certain matters (which runs for 12 months following each executive’s termination of employment). Each of the Trick Employment Agreement and the Ksenak Employment
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Agreement also sets forth certain stock ownership guidelines that apply to each of Messrs. Trick and Ksenak, respectively. The guidelines generally require that Messrs. Trick and Ksenak hold shares of the Company’s common stock equal in value to three times base salary for Mr. Trick and two times base salary for Mr. Ksenak. Each of the Trick Employment Agreement and the Ksenak Employment Agreement provides that the compensation of each Messrs. Trick and Ksenak will be subject to claw-back or recoupment to the extent required by Company policy or applicable law.
If employment of either Mr. Trick or Mr. Ksenak terminates due to death or “Disability” (as defined in the respective employment agreements), during the employment period, then such executive (or his representative or estate) will be entitled to receive his base salary through the date of termination, any unpaid annual incentive awards earned with respect to any fiscal year ending on or preceding the date of termination, and an annual annual incentive award for the year of termination based on actual full-year performance (with any individual factor being rated at 100%), pro-rated to reflect the time of service for such year through the date of termination, and any other accrued benefits to which said executive is entitled as of the date of termination. With respect to all of such executive’s outstanding equity awards granted on and after the effective date of his employment agreement, unless a particular award agreement provides for greater vesting rights (as is the case with the 2019 and 2020 PSU award agreements) (i) such executive will receive 12 months of vesting acceleration on his then-outstanding awards or, if vesting is less frequent than annually, a pro rata portion, with the period from the last vesting date (or, if none, the grant date) as the numerator and the period from such last vesting date (or grant date) to the next vesting date as the denominator, and (ii) with respect to the then-outstanding performance-based equity awards of such executive, he will be deemed to have satisfied the service-based component of such awards and will be eligible to receive a portion of each such award based on actual performance through the end of the applicable performance period, pro-rated to reflect their actual service plus 12 months during each performance period.
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The preceding summary of each of the Trick Employment Agreement and Ksenak Employment Agreement contained in this Proxy Statement is qualified in its entirety by reference to the full text of the Trick Employment Agreement which is filed as Exhibit 10.2 to Ambac’s Quarterly Report on Form 10-Q for the period ending September 30, 2016, and the full text of the Ksenak Employment Agreement which is filed as Exhibit 10.1 to Ambac’s Current Report on Form 8-K dated January 4, 2017, each as though it were fully set forth herein.
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Outstanding Equity Awards at 20182021 Fiscal Year-End
The following table provides information about the number and value of DSUs, RSUs and PSUs granted under Ambac’s 2013 Incentive Compensation PlanPlans (which includes the LTIP and STIP)LTIP) that have not settled or converted into shares of Ambac common stock (“vested”) and are held by our named executive officers as of December 31, 2018.2021. The market value of the DSUs, RSUs and PSUs was calculated based on the closing price of Ambac’s common stock on the NASDAQ Stock MarketNYSE on December 31, 20182021 ($17.24)16.05).
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Named Executive Officer | Number of Deferred Stock and Restricted Stock Units That Have Not Vested (#) (1) | Market Value of Deferred Stock and Restricted Stock Units That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Performance Stock Units That Have Not Vested (#) (2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Performance Stock Units that Have not Vested ($) |
Claude LeBlanc | 135,033 | $2,327,969 | 119,284 | $2,056,456 |
David Trick | 37,829 | $652,172 | 39,149 | $674,929 |
David Barranco | 20,940 | $361,006 | 27,841 | $479,979 |
Stephen M. Ksenak | 30,163 | $520,010 | 32,793 | $565,351 |
R. Sharon Smith | 29,819 | $514,080 | 13,254 | $228,499 |
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(1)
| The DSUs held by each of our NEOs vest in two equal annual installments on the first and second anniversaries of their grant date. The DSUs granted on March 2, 2018, 50% vest on March 2, 2019 and the remaining 50% vest on March 2, 2020. With respect to the DSU granted on March 2, 2017, the remaining 50% vest on March 2, 2019. RSUs granted to our NEOs on May 16, 2018 vest 50% on May 16, 2019, and 50% on May 16, 2020. RSUs granted on March 2, 2018, vest in three equal annual installments on March 2, 2019, 2020, and 2021. The RSUs granted to Messrs. Trick and Ksenak on February 22, 2016 vest in equal annual installments with the final vesting date on February 21, 2019. |
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(2)
| PSUs granted to our NEOs under Ambac's LTIP Plan on, February 22, 2016, March 2, 2017, and March 2, 2018, have a three year Performance Period and will vest within 60 days (for the March 22, 2016 awards) and 75 days (for the March 2, 2017, and March 2, 2018 awards) after the last day of the respective Performance Period occurring on December 31 of 2018, 2019, and 2020, respectively. The number of PSUs reported assumes that a target level of performance will be achieved over the Performance Period. |
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Named Executive Officer | Number of Restricted Stock Units That Have Not Vested (#) (1) | Market Value of Restricted Stock Units That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Performance Stock Units That Have Not Vested (#) (2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Performance Stock Units that Have not Vested ($) |
Claude LeBlanc | 136,838 | $2,196,250 | 355,749 | $5,709,771 |
David Trick | 32,717 | $525,108 | 82,800 | $1,328,940 |
David Barranco | 30,008 | $481,628 | 76,175 | $1,222,609 |
Stephen M. Ksenak | 26,273 | $421,682 | 66,123 | $1,061,274 |
R. Sharon Smith | 27,081 | $434,650 | 66,054 | $1,060,167 |
(1) RSUs granted on March 8, 2021,vest in three equal annual installments on each of March 8, 2022, 2023, and 2024. RSUs granted on March 4, 2020, vest in three equal annual installments on January 2, 2021, 2022, and 2023. RSUs granted on March 4, 2019, vest in three equal annual installments on January 2, 2020, 2021, and 2022.
(2) PSUs granted to our NEOs under Ambac's LTIP Plan on March 4, 2019 have a three year performance period and are subject to the rTSR modifier. While PSUs granted on March 4, 2020 and March 8, 2021 will not settle for a three year period and are subject to the rTSR modifier, the measurement period for determining the achievement of goals against the pre-set metrics was shortened to two years to create better alignment between Company performance and management compensation. PSUs granted in March 2019, 2020 and 2021 will vest within 75 days after December 31 of 2021, 2022, and 2023, respectively. The number of PSUs reported assumes that a target level of performance will be achieved over the relevant period.
Stock Vested in 20182021
The following table sets forth certain information concerning DSUs, RSUs and PSUs held by the named executive officers listed below that vested (i.e., settled or converted into shares of Ambac common stock) in 2018.2021. The value realized on vesting and settlement for each of our named executive officers was calculated based on the closing priceprices of our common stock on the NASDAQ Stock MarketNYSE on each of February 21, 2018, February 26, 2018,the following dates as set forth below: January 2, 2021 closed at $15.38; March 1, 2020 closed at $17.39; March 2, 20182021 closed at $16.77; and May 16, 2018. The closing price of our common stock on the NASDAQ Stock Market on February 21, 2018 was $15.84, on February 26, 2018 was $15.72, on March 2, 2018 was $15.09 and May 16, 2018 was $19.14.4, 2021 closed at $16.93.
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| | Stock Awards |
Named Executive Officer | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
Claude LeBlanc | | 3,707 |
| | $66,627 |
David Trick | | 22,717 |
| | $357,318 |
David Barranco | | 8,146 |
| | $128,189 |
Stephen M. Ksenak | | 12,866 |
| | $202,752 |
R. Sharon Smith | | 1,247 |
| | $20,162 |
Nonqualified Deferred Compensation
The Company's annual incentive program provides that 25% of the annual incentive awards for executive officers are paid in common stock units of Ambac with a deferred settlement provision (net of certain payroll taxes), and the remainder is paid in cash. These DSUs will settle and convert into Ambac common stock annually over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date (unless settled earlier due to an employee’s departure from the Company). The following table reports the value of the DSUs received by each of our named executive officers in lieu of cash.
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Name of Executive Officers | | Executive Contributions in 2018 $ | | Registrant Contributions in 2018 (1) $ | | Aggregate Earnings in 2018 $ | | Aggregate Withdrawals/ Distributions $ | | Aggregate Balance in 2018 (2) $ |
Claude LeBlanc | | — | | $344,897 | | — | | — | | $344,897 |
David Trick | | — | | 135,750 |
| | — | | — | | 207,583 |
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David Barranco | | — | | 82,376 |
| | — | | — | | 112,526 |
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Stephen M. Ksenak | | — | | 98,643 |
| | — | | — | | 146,539 |
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R. Sharon Smith | | — | | 236,717 |
| | — | | — | | 236,717 |
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(1)
| Amounts reported in this column are also included in the “Stock Awards” column in the 2018 Summary Compensation Table. |
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(2)
| Amounts reported in this column include the aggregate value of DSUs as of their grant date that were awarded in 2018 and 2017 that have not settled and converted into shares of Ambac common stock. |
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| | Stock Awards |
Named Executive Officer | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
Claude LeBlanc | | 296,340 | | $5,079,346 |
David Trick | | 47,989 | | $818,584 |
David Barranco | | 36,682 | | $623,872 |
Stephen M. Ksenak | | 38,464 | | $656,325 |
R. Sharon Smith | | 35,390 | | $603,627 |
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Potential Payments Upon Termination or Change-in-Control
The following table shows the potential payments that would be made by the Company to each of the named executive officersNEOs assuming that such officer's employment with the Company was terminated on December 31, 20182021 under the circumstances outlined in the table. For purposes of this table, the per share price of the Company's common stock is assumed to be $17.24,$16.05, which was the closing price on December 31, 2018.2021.
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| | Prior to a Change of Control | | In Connection with a Change of Control |
Named Executive Officer | | Death or Disability | Involuntary Termination without "Cause" or by Executive for "Good Reason" | Voluntary Resignation | | Death or Disability | Involuntary Termination without "Cause" or by Executive for "Good Reason" | Voluntary Resignation |
Claude LeBlanc | | | | | | | | |
Severance payment(1) | | $ | — | | $ | 5,175,000 | | $ | — | | | $ | — | | $ | 5,175,000 | | $ | — | |
RSU settlement(2) | | 2,196,250 | | 2,196,250 | | — | | | 2,196,250 | | 2,196,250 | | — | |
PSU settlement(3) | | 5,709,771 | | — | | — | | | 5,709,771 | | — | | — | |
Pro-rata Annual STIP Award(4) | | 1,125,000 | | 1,125,000 | | — | | | 1,125,000 | | 1,125,000 | | — | |
Benefits(5) | | — | | 33,790 | | — | | | — | | 33,790 | | |
Total | | $ | 9,031,021 | | $ | 8,530,040 | | $ | — | | | $ | 9,031,021 | | $ | 8,530,040 | | $ | — | |
David Trick | | | | | | | | |
Severance payment(1) | | $ | — | | $ | 1,762,500 | | $ | — | | | $ | — | | $ | 2,325,000 | | $ | — | |
RSU settlement(2) | | 525,108 | | 525,108 | | — | | | 525,108 | | 525,108 | | — | |
PSU settlement(3) | | 1,328,940 | | — | | — | | | 1,328,940 | | — | | — | |
Pro-rata Annual STIP Award(4) | | 425,000 | | 425,000 | | — | | | 425,000 | | 425,000 | | — | |
Benefits(5) | | — | | 37,230 | | — | | | — | | 37,230 | | — | |
Total | | $ | 2,279,048 | | $ | 2,749,838 | | $ | — | | | $ | 2,279,048 | | $ | 3,312,338 | | $ | — | |
David Barranco | | | | | | | | |
Severance payment(1) | | $ | — | | $ | 500,000 | | $ | — | | | $ | — | | $ | 500,000 | | $ | — | |
RSU settlement(2) | | 481,628 | | 481,628 | | — | | | 481,628 | | 481,628 | | — | |
PSU settlement(3) | | 1,222,609 | | — | | — | | | 1,222,609 | | — | | — | |
Benefits(5) | | — | | 30,312 | | — | | | — | | 30,312 | | — | |
Total | | $ | 1,704,237 | | $ | 1,011,940 | | $ | — | | | $ | 1,704,237 | | $ | 1,011,940 | | $ | — | |
Stephen M. Ksenak | | | | | | | | |
Severance payment(1) | | $ | — | | $ | 1,500,000 | | $ | — | | | $ | — | | $ | 2,000,000 | | $ | — | |
RSU settlement(2) | | 421,682 | | 421,682 | | — | | | 421,682 | | 421,682 | | — | |
PSU settlement(3) | | 1,061,274 | | — | | — | | | 1,061,274 | | — | | — | |
Pro-rata Annual STIP Award(4) | | 400,000 | | 400,000 | | — | | | 400,000 | | 400,000 | | — | |
Benefits(5) | | — | | 40,685 | | — | | | — | | 40,685 | | — | |
Total | | $ | 1,882,956 | | $ | 2,362,367 | | $ | — | | | $ | 1,882,956 | | $ | 2,862,367 | | $ | — | |
R. Sharon Smith | | | | | | | | |
Severance payment(1) | | $ | — | | $ | 500,000 | | $ | — | | | $ | — | | $ | 500,000 | | $ | — | |
RSU settlement(2) | | 434,650 | | 434,650 | | — | | | 434,650 | | 434,650 | | — | |
PSU settlement(3) | | 1,060,167 | | — | | — | | | 1,060,167 | | — | | — | |
Benefits(5) | | — | | 30,312 | | — | | | — | | 30,312 | | — | |
Total | | $ | 1,494,817 | | $ | 964,962 | | $ | — | | | $ | 1,494,817 | | $ | 964,962 | | $ | — | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Prior to a Change of Control | | In Connection with a Change of Control |
Named Executive Officer | | Death or Disability | Involuntary Termination without "Cause" or by Executive for "Good Reason" | Voluntary Resignation | | Death or Disability | Involuntary Termination without "Cause" or by Executive for "Good Reason" | Voluntary Resignation |
Claude LeBlanc | | | | | | | | |
Severance payment (1) | | $ | — |
| $ | 4,500,000 |
| $ | — |
| | $ | — |
| $ | 4,500,000 |
| $ | — |
|
RSU settlement (2) | | 1,933,931 |
| 1,933,931 |
| 905,686 |
| | 1,933,931 |
| 1,933,931 |
| 905,686 |
|
DSU settlement (3) | | 394,037 |
| 394,037 |
| 394,037 |
| | 394,037 |
| 394,037 |
| 394,037 |
|
Pro-rata Annual STIP Award(4) | | 900,000 |
| 900,000 |
| — |
| | 900,000 |
| 900,000 |
| — |
|
Benefits (5) | | — |
| 17,059 |
| — |
| | — |
| 17,059 |
| — |
|
Total | | $ | 3,227,968 |
| $ | 7,745,027 |
| $ | 1,299,723 |
| | $ | 3,227,968 |
| $ | 7,745,027 |
| $ | 1,299,723 |
|
David Trick | | | | | | | | |
Severance payment (1) | | $ | — |
| $ | 1,743,750 |
| $ | — |
| | $ | — |
| $ | 2,325,000 |
| $ | — |
|
RSU settlement (2) | | 441,672 |
| 367,609 |
| 215,276 |
| | 441,672 |
| 441,672 |
| 289,339 |
|
DSU settlement (3) | | 210,500 |
| 210,500 |
| 210,500 |
| | 210,500 |
| 210,500 |
| 210,500 |
|
Pro-rata Annual STIP Award(4) | | 412,500 |
| 412,500 |
| — |
| | 412,500 |
| 412,500 |
| — |
|
Benefits (5) | | — |
| 31,210 |
| — |
| | — |
| 31,210 |
| — |
|
Total | | $ | 1,064,672 |
| $ | 2,765,569 |
| $ | 425,776 |
| | $ | 1,064,672 |
| $ | 3,420,882 |
| $ | 499,839 |
|
David Barranco | | | | | | | | |
Severance payment (1) | | $ | — |
| $ | 500,000 |
| $ | — |
| | $ | — |
| $ | 500,000 |
| $ | — |
|
RSU settlement (2) | | 243,636 |
| 243,636 |
| 129,386 |
| | 243,636 |
| 243,636 |
| 129,386 |
|
DSU settlement (3) | | 117,370 |
| 117,370 |
| 117,370 |
| | 117,370 |
| 117,370 |
| 117,370 |
|
Benefits (5) | | — |
| 26,544 |
| — |
| | — |
| 26,544 |
| — |
|
Total | | $ | 361,006 |
| $ | 887,550 |
| $ | 246,756 |
| | $ | 361,006 |
| $ | 887,550 |
| $ | 246,756 |
|
Stephen M. Ksenak | | | | | | | | |
Severance payment (1) | | $ | — |
| $ | 1,350,000 |
| $ | — |
| | $ | — |
| $ | 1,800,000 |
| $ | — |
|
RSU settlement (2) | | 370,367 |
| 296,304 |
| 172,521 |
| | 370,367 |
| 370,367 |
| 246,584 |
|
DSU settlement (3) | | 149,643 |
| 149,643 |
| 149,643 |
| | 149,643 |
| 149,643 |
| 149,643 |
|
Pro-rata Annual STIP Award(4) | | 300,000 |
| 300,000 |
| — |
| | 300,000 |
| 300,000 |
| — |
|
Benefits (5) | | — |
| 33,456 |
| — |
| | — |
| 33,456 |
| — |
|
Total | | $ | 820,010 |
| $ | 2,129,403 |
| $ | 322,164 |
| | $ | 820,010 |
| $ | 2,653,466 |
| $ | 396,227 |
|
R. Sharon Smith | | | | | | | | |
Severance payment (1) | | $ | — |
| $ | 450,000 |
| $ | — |
| | $ | — |
| $ | 450,000 |
| $ | — |
|
RSU settlement (2) | | 243,636 |
| 243,636 |
| 129,386 |
| | 243,636 |
| 243,636 |
| 129,386 |
|
DSU settlement (3) | | 270,444 |
| 270,444 |
| 270,444 |
| | 270,444 |
| 270,444 |
| 270,444 |
|
Benefits (5) | | — |
| 26,544 |
| — |
| | — |
| 26,544 |
| — |
|
Total | | $ | 514,080 |
| $ | 990,624 |
| $ | 399,830 |
| | $ | 514,080 |
| $ | 990,624 |
| $ | 399,830 |
|
(1)Pursuant to the employment agreements between Ambac and each of Messrs. LeBlanc, Trick and Ksenak, each of Messrs. LeBlanc, Trick and Ksenak are entitled to receive the severance payments listed above if terminated “without cause”, or if they resign for “good reason.” See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.” Pursuant to Ambac's Severance Pay Plan, as described below, each of Mr. Barranco, and Ms. Smith is entitled to receive the severance payments listed above if terminated “without cause” (or “Just Cause,” as that term is used in the Severance Pay Plan).
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Ambac Financial Group, Inc. |60 68 | 20192022 Proxy Statement |
(2)Each of Contents
our named executive officers received RSUs grants on March 4, 2019, March 4, 2020, and March 8, 2021. The remainder of the March 4, 2019, RSU awards vested and settled on January 2, 2022. The remainder of the March 4, 2020, RSU awards vest and settle in equal annual installments on January 2, 2022 and 2023. The March 8, 2021, RSU awards vest and settle in three equal annual installments on March 8, 2022, 2023 and 2024. Valuation of all RSU awards is based upon the closing price of our common stock on December 31, 2021.
(3)With respect to the 2019, 2020 and 2021 PSU awards, if a termination occurred prior to the last day of the performance period by reason of death, the beneficiaries of the named executive officer would be entitled to receive the number of PSUs that the named executive officer would have been entitled to receive at a 100% overall payout multiple regardless of the outcome of any of the performance conditions. No amounts are include above with respect to 2019, 2020 and 2021 PSU awards for a termination by reason of disability nor involuntary termination without "Cause" or by Executive for "Good Reason", because any required payout can not be determined until the end of the relevant performance period.
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(1)(4)Pursuant to the terms of the employment agreements for each of Messrs. LeBlanc, Trick, and Ksenak, each of these executive officers is entitled receive a pro-rated portion of the annual STIP award that he would have received in the absence of such termination. Assuming a December 31, 2021 termination, each of Messrs. LeBlanc, Trick and Ksenak were assumed to have received their target STIP award for 2021 as approved by the Compensation Committee in February of 2021. (5)Messrs. LeBlanc, Trick and Ksenak and their eligible dependents will be entitled to continue to participate in such basic medical and life insurance programs of the Company as are in effect from time to time, on the same terms and conditions as applicable to active senior executives of the Company, for twelve months or, if earlier, until the date said executive becomes eligible to receive coverage from another employer or is otherwise no longer eligible to receive COBRA continuation coverage. Pursuant to Ambac's Severance Pay Plan, in addition to the severance payments listed, Mr. Barranco and Ms. Smith would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage in the same amount as was previously paid by the Company for the same group health insurance coverage under the Company's group health plan for the first twelve months following their termination of employment. The amounts included in the table reflect the cost of COBRA benefit continuation coverage under the plan in which the particular executive is enrolled, less the monthly active employee cost of these benefits, as well as for Messrs. LeBlanc, Trick and Ksenak the cost of continued life insurance coverage for the 12 month severance period. | Pursuant to the employment agreements between Ambac and each of Messrs. LeBlanc, Trick and Ksenak, each of Messrs. LeBlanc, Trick and Ksenak are entitled to receive the severance payments listed above if terminated “without cause”, or if he resigns for “good reason”. See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.” Pursuant to Ambac's Severance Pay Plan, as described below, each of Mr. Barranco, and Ms. Smith is entitled to receive the severance payments listed above if terminated “without cause” (or “Just Cause,” as that term is used in the Severance Pay Plan). |
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(2)
| Each of our named executive officers received RSUs grants on March 2, 2018 and May 16, 2018. The March 2, 2018, RSU awards vest and settle in three equal annual installments on March 2, 2019, 2020, and 2021. The May 16, 2018, RSU awards vest and settle in two equal annual installments on May 16, 2019, and 2020; provided, that if the recipient’s employment with the Company is terminated for any reason, all of the RSUs granted on May 16, 2018 would vest and settle immediately. Messrs. Trick and Ksenak also received an RSU grant on February 22, 2016, which vested and settled in three equal annual installments. The final tranche of those RSUs vested and converted into shares of Ambac common stock on February 21, 2019. Valuation of all RSU awards is based upon the closing price of our common stock on December 31, 2018. |
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(3)
| DSUs awards settle and convert into Ambac common stock annually over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date (unless settled earlier due to an executive’s departure from the Company). Valuation of all DSU awards is based upon the closing price of our common stock on December 31, 2018. |
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(4)
| Pursuant to the terms of the employment agreements for each of Messrs. LeBlanc, Trick, and Ksenak, each of these executive officers is entitled receive a pro-rated portion of the annual STIP award that he would have received in the absence of such termination. Assuming a December 31, 2018 termination, each of Messrs. LeBlanc, Trick and Ksenak were assumed to have received their target STIP award for 2018 (annual cash incentive award plus value of DSU award) as set forth in their respective employment agreements. |
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(5)
| Messrs. LeBlanc, Trick and Ksenak and their eligible dependents will be entitled to continue to participate in such basic medical and life insurance programs of the Company as are in effect from time to time, on the same terms and conditions as applicable to active senior executives of the Company, for twelve months or, if earlier, until the date said executive becomes eligible to receive coverage from another employer or is otherwise no longer eligible to receive COBRA continuation coverage. Pursuant to Ambac's Severance Pay Plan, in addition to the severance payments listed, Mr. Barranco and Ms. Smith would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage in the same amount as was previously paid by the Company for the same group health insurance coverage under the Company's group health plan for the first twelve months following their termination of employment. The amounts included in the table reflect the cost of COBRA benefit continuation coverage under the plan in which the particular executive is enrolled, less the monthly active employee cost of these benefits, as well as for Messrs. LeBlanc, Trick and Ksenak the cost of continued life insurance coverage for the 12 month severance period. |
Each of our named executive officers received both a PSU and an LTIPRSU award agreement in connection with their LTIP awards in 2018,2019, 2020, and Messrs. Trick, Barranco, and Ksenak also received an LTIP agreement in connection with their LTIP awards in 2016 and 2017.2021. In general, thosethese agreements provideprovided that unvested cash incentive awards (only applicable to the 2016 LTIP awards), PSUs and RSUs arewould be forfeited on termination of employment, except in limited cases such as death, disability, an involuntary termination by the Company other than for “cause,” or Retirement (as defined in the relevant LTIP agreement) and the termination occurs (i) on or after January 1, 2017 with respect to the 2016 LTIP Award, or (ii) on or after January 1, 2018 with respect to the 2017 LTIP Award, or (iii) on or after June 30, 2018 with respect to the 2018 LTIP Award, but prior to the last day of the respective Performance Period. Ifif a termination occurs on or after one of the dates described in the preceding sentenceoccurred by reason of death, disability, an involuntary termination by the Company other than for “cause,” or Retirement, the recipient would be entitled to receive a prorated portion of the respective LTIPPSU award which would only be payable at the end of the relevant performance period (December 31, 2018 with respect toand based on the 2016 LTIP Award; December 31, 2019 with respect to the 2017 LTIP Award; and December 31, 2020 with respect to the 2018 LTIP Award) provided thatsatisfaction of the performance conditions, if any, related to eachsuch award were satisfied. Becauseand the full value of any unvested RSU award at the time of termination; and (ii) if a termination occurred prior to the last day of the performance willperiod by reason of death, the beneficiaries of the named executive officer would be entitled to receive the number of PSUs that the named executive officer would have been entitled to receive at a 100% overall payout multiple regardless of the outcome of any of the performance conditions and the full value of any unvested RSU award. Except in the case of death, since the value of any payout pursuant PSU award can not be determined until the end of the performance period, no amounts are included in the table above with respect to any other category of termination for the 2016, 2017,2019, 2020, or 2018 LTIP2021 PSU awards.
As of December 31, 2018,2021, Ambac did not have any contracts, agreements, plans or arrangements that provided for a payment to a named executive officer solely upon a change-in control of Ambac, other than a legacy RSU agreement used for a special RSU grant to each of Messrs. Trick and Ksenak in February 2016 that provided for accelerated vesting upon a change-in control.Ambac.
Severance Pay Plan
Pursuant to Ambac’s Severance Pay Plan, each of our executive officers (other than Messrs. LeBlanc, Trick and Ksenak) is entitled to receive a severance payment equal to 52 weeks of such executive officer’s weekly base salary at the time of termination of his or her employment by Ambac as the result of (i) a job elimination, job
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Ambac Financial Group, Inc. |61 | 2019 Proxy Statement
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discontinuation, office closing, reduction in force, business restructuring, redundancy, or such other circumstances as the Company deems appropriate for the payment of severance or (ii) a “termination by mutual agreement” (as defined in the Severance Pay Plan).
The severance benefits payable under the Severance Pay Plan are conditioned upon the applicable named executive officer executing and delivering an agreement and general release of claims in favor of the Company. With respect to a termination for "Cause" (or “Just Cause,” as that term is used in the Severance Pay Plan) the term generally means any one of the following reasons for the discharge or other separation of a named executive
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Ambac Financial Group, Inc. | 69 | 2022 Proxy Statement |
officer from employment with the Company: (a) any act or omission by the named executive officer resulting or intended to result in personal gain at the expense of the Company;Company or one of its affiliates; (b) the improper disclosure by the named executive officer of proprietary or confidential information or trade secrets of the Company or one of its affiliates, including, without limitation, client lists; or (c) misconduct by the named executive officer, including, but not limited to, convictions, pleas of nolo contendere or no contest, or commission of felonies, fraud, intentionalor crimes involving moral turpitude; violation of or negligent disregard for the rules and procedures of the Company or any affiliate (including a violation of the Company's codeCode of business conduct)Business Conduct), theft, violent acts or threats of violence,violence; or possession of alcohol or controlled substances on the property of the Company.Company or any affiliate.
Pay Ratio Disclosure
Presented below is the ratio of annual total compensation of our CEO to the median of the annual total compensation of all our employees (excluding our CEO). The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934.
In identifying our median employee, we calculated the annual total compensation of each employee for the twelve month period that ended on December 31, 2018.2021. Total compensation for these purposes included base salary, annual cash incentive award, and any equity awards granted or issued in 20182021 and was calculated using internal payroll/tax records. We did not apply any cost-of-living adjustments as part of the calculation.
We selected the median employee based on the 123150 full-time and part-time workers who were employed as of December 31, 2018,2021, including independent contractors that we determined were our employees exclusively for the purpose complying with SEC reporting on “Pay Ratio Disclosure.” We did not exclude any non-U.S. employees using the SEC’s permitted exclusions under Item 402(u) of Regulation S-K.
The 20182021 annual total compensation as determined under Item 402 of Regulation S-K for our CEO was $6,203,007.$6,979,315. The 20182021 annual total compensation as determined under Item 402 of Regulation S-K for our median employee was $248,724.$234,874. The ratio of our CEO’s annual total compensation to the median of the annual total compensation of all our employees (excluding our CEO) for fiscal year 20182021 is 2530 to 1.
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Ambac Financial Group, Inc. |62 70 | 20192022 Proxy Statement |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Principal Accounting Fees and Services
Audit and All Other Fees
The following table presents fees for professional audit services rendered by KPMG LLP for the integrated audit of Ambac's consolidated financial statements and internal control over financial reporting for the years ended December 31, 20182021 and 2017,2020, and fees billed for other services rendered by KPMG LLP during those periods. All of the fees for calendar years 20182021 and 20172020 presented below were approved by the Audit Committee.
| | | | | | | | | | | | | | |
Audit Related Expenses | | 2021 | | 2020 |
Audit Fees (1) | | $ | 3,355,982 | | | $ | 3,211,176 | |
Audit Related Fees (2) | | 6,191 | | | 461,060 | |
Tax Fees (3) | | 84,184 | | | 139,655 | |
All Other Fees (4) | | 39,000 | | | 41,000 | |
Total | | $ | 3,485,357 | | | $ | 3,852,891 | |
|
| | | | | | | | |
Audit Related Expenses | | 2018 | | 2017 |
Audit Fees (1) | | $ | 3,244,318 |
| | $ | 3,635,564 |
|
Audit Related Fees (2) | | 84,500 |
| | 80,500 |
|
Tax Fees (3) | | 70,883 |
| | 48,545 |
|
All Other Fees (4) | | — |
| | — |
|
Total | | $ | 3,399,701 |
| | $ | 3,764,609 |
|
(1)Audit fees consisted of audit work performed in connection with the annual and quarterly financial statements, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, consents, comfort letters and other attestation services. | |
(1)(2)Audit related fees are for services traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, agreed upon procedures and certain consultation regarding financial accounting and/or reporting standards. The majority of the 2020 fees related to services provided for potential and executed acquisitions. (3)Tax fees consist principally of tax compliance services and tax advice to Ambac. Of the total amount of tax fees for 2021, $61,509 related to tax compliance and $22,675 related to tax advice. Of the total amount of tax fees for 2020, $101,421 related to tax compliance and $38,234 related to tax advice. Compliance-related tax fees were for professional services rendered in connection with the preparation of the federal and foreign tax returns. (4)Other fees are those associated with services not captured in the other categories and include independent actuarial reserve opinions for both periods presented. | Audit fees consisted of audit work performed in connection with the annual and quarterly financial statements, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, consents, comfort letters and attestation services. |
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(2)
| Audit related fees are for services traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, agreed upon procedures and certain consultation regarding financial accounting and/or reporting standards. In 2018 and 2017, these fees consisted principally of (i) audits of employee benefit plans and (ii) accounting and consultations regarding accounting standards. |
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(3)
| Tax fees consist principally of tax compliance services and tax advice to Ambac. Of the total amount of tax fees for 2018, $70,833 related to tax compliance and $0 related to tax advice. Of the total amount of tax fees for 2017, $36,098 related to tax compliance and $12,447 related to tax advice. Compliance-related tax fees were for professional services rendered in connection with the preparation of the federal and foreign tax returns. |
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(4)
| Other fees are those associated with services not captured in the other categories. Ambac generally does not request such services from the independent registered public accounting firm. |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation, and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.
Prior to engagement of the independent registered public accounting firm for the next year’s audit, management and/or the independent registered public accounting firm will submit to the Audit Committee for approval a summary of services expected to be rendered during that year for each of the categories of services.
Prior to engagement, the Audit Committee pre-approves these services by category of service. The Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budgetpre-approved amounts periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, any services provided by the independent registered public accounting firm will be pre-approved by the Audit Committee or, if between meetings of the Audit Committee, by its Chairman pursuant to authority delegated by the Audit Committee. The Chairman reports all pre-approval decisions made by him at the next meeting of the Audit Committee, and he has undertaken to confer with the Audit Committee to the extent that any engagement for which his pre-approval is sought is expected to generate fees for the independent registered public accounting firm in excess of $100,000.
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Ambac Financial Group, Inc. |63 71 | 20192022 Proxy Statement |
THE AUDIT COMMITTEE REPORT
The Audit Committee of Ambac is responsible for providing independent, objective oversight of Ambac’s accounting functions, internal controls and risk management. The Audit Committee selectsis responsible for the appointment, compensation and oversight of the independent registered public accounting firm. As of the date of this report, the Audit Committee was composed of four directors, each of whom is independent within the meaning of the rules of the SECSecurities and Exchange Commission ("SEC") and the Listing Rules of NASDAQ.NYSE. In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, Ambac has determined that threeall four members of the Audit Committee, Messrs. Herzog, Haft, Prieur and Prieur,Ms. Iglesias, are “audit committee financial experts" as that term is defined in the rules and regulations of the SEC.
The Audit Committee operates under a written charter adopted by the Board.Ambac's Board of Directors. A copy of the charter is available at Ambac’s website: http:https://ir.ambac.com/corporate-governance-0ambac.com/investor-relations/governance/governance-documents/default.aspx. The Audit Committee regularly reviews its charter to ensure that it is meeting all relevant Audit Committee policy requirements of the SEC and the NASDAQ Stock Exchange.NYSE. .
Management is responsible for the preparation, presentation and integrity of Ambac’s financial statements, accounting and financial reporting principles, the establishment and effectiveness of internal controls (including internal control over financial reporting) and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for performing an independent audit of Ambac’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), expressing an opinion, based on their audit, as to whether the financial statements fairly present, in all material respects, the financial position, results of operations and cash flows of Ambac in conformity with generally accepted accounting principles and auditing the effectiveness of internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes. However, none of the members of the Audit Committee is professionally engaged in the practice of accounting or auditing. The Audit Committee relies, without independent verification, upon the information provided to it and on the representations made by management and the independent registered public accounting firm.
In 2018,2021, the Audit Committee held elevensix meetings. The meetings were designed, among other things, to facilitate and encourage communication among the Audit Committee, management, our internal auditors and our independent registered public accounting firm, KPMG LLP.LLP ("KPMG"). The Audit Committee discussed with our internal auditors and KPMG LLP the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors and KPMG, LLP, with and without management present, to discuss the results of their examinations and their evaluations of Ambac’s internal controls. The Audit Committee also met with the Chief Financial Officer, with and without other members of management present, to discuss matters relating to financial reporting and internal controls.
The Audit Committee has reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2018,2021, with management, our internal auditors and KPMG LLP.KPMG. The Audit Committee also discussed with management and KPMG LLP the process used to support certifications by Ambac’s Chief Executive Officer and Chief Financial Officer that are required by the SEC and the Sarbanes-Oxley Act of 2002 to accompany Ambac’s periodic filings with the SEC.
The Audit Committee also discussed with KPMG LLP matters required to be discussed with audit committees under auditing standards, including, among other things, matters related to the conduct of the audit of Ambac’s consolidated financial statements and the matters required to be discussed by Auditing Standard No. 1301, Communication with Audit Committees (AS 1301).
KPMG LLP also provided to us the written disclosures regarding their independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and the Audit
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Ambac Financial Group, Inc. | 72 | 2022 Proxy Statement |
Committee discussed with them their independence from Ambac. When determining KPMG LLP’sKPMG’s independence, the Committee considered, among other matters, information provided by KPMG regarding
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Ambac Financial Group, Inc. |64 | 2019 Proxy Statement
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PCAOB inspections, and whether KPMG’s provision of services to Ambac beyond those rendered in connection with their audit of Ambac’s consolidated financial statements and reviews of Ambac’s consolidated financial statements included in its Quarterly Reports on Form 10-Q was compatible with maintaining their independence. The Audit Committee also reviewed, among other things, the audit, non-audit and tax services performed by, and the amount of fees paid for such services to, KPMG LLP.KPMG. The Audit Committee concluded that KPMG, LLP, an independent registered public accounting firm, is independent from Ambac and its management.
Every year, the Audit Committee evaluates the performance of the independent auditor and considers whether to retain the current independent auditor or consider rotating the engagement to a different audit firm. This evaluation is based on a number of factors including the professional qualifications of the independent auditor, the performance of the senior audit engagement team and the lead audit partner and the quality of the firm’s communications with the Audit Committee and Ambac. Based on its review, the Audit Committee determined that the continued retention of KPMG to serve as the company’s independent auditor is in the best interests of the company and its shareholders. Accordingly, the Audit Committee appointed KPMG as Ambac’s independent auditor for the year ended December 31, 2022. KPMG has served as Ambac’s independent auditor since 1985. Although the Audit Committee has the sole authority to appoint the independent auditor, the Audit Committee recommended that Ambac’s Board of Directors seek shareholder ratification of the appointment at the next annual meeting of shareholders as a matter of good corporate governance.
Based upon the review and discussions referred to above, the Audit Committee recommended to the Board that Ambac’s audited financial statements for the year ended December 31, 20182021 be included in Ambac’s Annual Report on Form 10-K for the year ended December 31, 20182021 for filing with the SEC. The Audit Committee also selected KPMG LLP as Ambac’s independent registered public accounting firm for 2019.2022.
The Audit Committee
David L. Herzog (Chairman), Ian D. Haft, Joan Lamm-TennantLisa G. Iglesias and C. James Prieur
February 25, 201923, 2022
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of the Company’ equity securities (collectively, our “insiders”), to file reports with the SEC on their initial beneficial ownership of Ambac common stock and any subsequent changes in their ownership. Our insiders must also provide us with copies of all Section 16(a) forms they file. We reviewed copies of all reports furnished to us and obtained written representations from our insiders that all transactions have been reported to us. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations from the Company’s officers and directors, all Section 16(a) filing requirements applicable to our insiders were complied with during 2018.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions Policy and Procedure
Our Related Party Transactions Policy provides that Ambac will only enter into or ratify a related party transaction when our Board of Directors, acting through the Governance and Nominating Committee, determines that the related party transaction is in the best interests of Ambac and our stockholders.
For the purposes of this policy,
• a “related party” means:
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◦ | a member of the Board of Directors (or a nominee to the Board of Directors); |
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◦ | any person who is known by Ambac to be the beneficial owner of more than 5% of our common stock; or |
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◦ | any person known by Ambac to be an immediate family member of any of the persons listed above; and |
◦a member of the Board of Directors (or a nominee to the Board of Directors);
◦an executive officer;
◦any person who is known by Ambac to be the beneficial owner of more than 5% of our common stock; or
◦any person known by Ambac to be an immediate family member of any of the persons listed above; and
• a “related party transaction” means a transaction (and/or amendment thereto) with a related party occurring since the beginning of our last fiscal year, or any currently proposed transaction, involving Ambac where the amount exceeds $120,000 and in which any related party had or will have a direct or indirect material interest.
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Ambac Financial Group, Inc. | 73 | 2022 Proxy Statement |
• Materiality is determined on the basis of the significance of the information to investors in light of all the circumstances. Factors to be considered in determining whether a Related Party’s interest is material include:
◦the importance of the interest to the Related Party (financial or otherwise);
◦the relationship of the Related Party to the transaction;
◦the relationship of the Related Parties to each other; and
◦the dollar amount involved in the transaction.
Each of our directors and executive officers is required to bring potential related party transactions to the attention of Ambac and are periodically required to confirm and provide details of such transactions. Our legal staff, in consultation with management and with outside counsel, as appropriate, determines whether any transaction or relationship brought to Ambac’s attention does, in fact, constitute a related party transaction requiring compliance with our Related Party Transactions Policy.
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Ambac Financial Group, Inc. |65 | 2019 Proxy Statement
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If our legal department determines that a transaction is a related party transaction, the Governance and Nominating Committee must review the transaction and either approve or disapprove it. A related party transaction entered into without pre-approval of the Committee will not be deemed to violate the Related Party Transactions Policy, or be invalid or unenforceable, so long as the transaction is brought to the Governance and Nominating Committee as promptly as reasonably practical after it is entered into or after it becomes reasonably apparent that the transaction is covered by our Related Party Transactions Policy. In determining whether to approve or ratify a transaction with a related party, the Governance and Nominating Committee will take into account all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate:
•whether the terms of the related party transaction are fair and reasonable to Ambacthe Company, in the Company’s best interests, and offered on the same basis as would apply if the transaction did not involve a related party;
•whether there are business reasons for Ambache Company to enter into the related party transaction;
•whether the related party transaction would impair the independence of an outside director; and
•whether the related party transaction would present an improper conflict of interests for any director or executive officer of Ambac,he Company, taking into account the size of the transaction, the overall financial position of the director, executive officer or other related party, the direct or indirect nature of the director's, executive officer's or other related party's interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Governance and Nominating Committee deems relevant.
Any member of the Governance and Nominating Committee who is a related party with respect to a hasaninterestinthetransactionunder review may not votediscussionwillabstainfrom voting on the approval of the related party transaction, but may, if so requested by the Chair of the Committee, participate in some or all of the Committee's discussions of the related party transaction. Upon completion of its review of the transaction, the Committee maydetermineto permit or toprohibit the related party transaction.
No related party transactionsAmbac retained the services of BlackRock Financial Management, Inc for accounting, operational, and risk management services in 2021 for which it paid approximately $975,000. According to a Schedule 13G/A filed on January 27, 2022, BlackRock Inc. beneficially owns approximately 13.9% of Ambac's common stock. The Governance and Nominating Committee has reviewed and approved the engagement of BlackRock Financial Management, Inc for these services.
There were no other related party transactions identified by management, the Board or the Governance and Nominating Committee in 2018.
Committee.
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Ambac Financial Group, Inc. |66 74 | 20192022 Proxy Statement |
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PROPOSAL NUMBER 1 |
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ELECTION OF DIRECTORS |
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Nominees |
The Governance and Nominating Committee has recommended, and the Board of Directors has nominated:
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ü | | Ian D. Haft | | ü | C. James Prieur |
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ü | | Alexander D. GreeneDavid L. Herzog | | ü | C. James Prieur |
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ü | | Ian D. Haft | | ü | Jeffrey S. Stein |
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ü | | David L. HerzogLisa G. Iglesias | | ü | Joan Lamm-Tennant |
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ü | | Claude LeBlanc | | | |
as nominees for election as members of our Board of Directors at the Annual Meeting. At the Annual Meeting, seven directors will be elected to the Board of Directors.
Except as set forth below, unless otherwise instructed, the persons appointed in the accompanying form of proxy will vote the proxies received by them for these nominees, who are all presently directors of Ambac.nominees. In the event that any nominee becomes unavailable or unwilling to serve as a member of our Board of Directors, the proxy holders will vote in their discretion for a substitute nominee. The term of office for each person elected as a director will continue until our next annual meeting or until a successor has been elected and qualified, or until the director’s earlier death, resignation, or removal.
The sections titled “Board of Directors” and “Director Selection Process and Qualifications” in this Proxy Statement contain more information about the leadership skills and other experiences that led our Governance and Nominating Committee and our Board of Directors to recommend each as a nominee for director. Each of the director nominees elected to the Board of Directors shall be entitled to receive the compensation package for the 2022 fiscal year set forth in the section titled “Board Compensation Arrangements for Non-Employee Directors -- Compensation for Non-Employee Directors in 2022."
Required Vote
The seven nominees receiving the highest number of affirmative “FOR” votes shall be elected as directors. Unless marked to the contrary, proxies received will be voted “FOR” these nominees.
Ambac Recommendation
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þ | | Our Board of Directors recommends a vote “FOR” the election to the Board of Directors of each of the above mentioned nominees. |
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Ambac Financial Group, Inc. |67 75 | 20192022 Proxy Statement |
We are asking our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with Item 402 of Regulation S-K, which is the SEC’s rule setting forth executive compensation disclosure requirements.
Our executive compensation program is designed to attract, motivate, and retain our executive officers, who are critical to our success. See “Executive Compensation — Compensation Discussion and Analysis” for additional information.
RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 20192022 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and disclosure.
The say on pay vote is advisory, and therefore not binding on our Company, the Compensation Committee or the Board of Directors. However, the Board of Directors and the Compensation Committee value the opinions of our stockholders and will review the voting results carefully.